When will general loans be available to participants of the Nationwide Retirement Solutions (NRS) and ICMA-RC Deferred Compensation Plans?
The deferred compensation plan documents have been amended to allow loans for all purposes as of March 1, 2009.
What are some of the disadvantages of obtaining a loan?
The amount of interest a participant pays on a loan may be less than the money would have earned had it been invested during the time it takes to repay the loan.
Employees may be inclined to stop or decrease contributions to their account as they try to pay off the loan.
Loan repayments are with post-tax dollars. If the participant does not repay the loan, when due, the outstanding balance becomes taxable income. Money intended for retirement is reduced.
Is there any restriction on the use of the loan?
No.
What is the maximum loan amount?
The lesser of 50% of the deferred compensation account balance or $50,000.
Does the maximum loan amount apply to both deferred compensation plans offered by the County?
Yes. The maximum loan amount is a combined limit for both plans offered. Therefore, if an employee participates in both ICMA-RC and NRS, the combined maximum loan they could receive is the lesser of 50% of the account balances or $50,000.
What is the maximum term of the loans?
For general loans, the repayment may be up to 5 years. However, the maximum term for loans, for the purchase a primary residence, is 15 years.
May the loan interest be deducted on the federal income tax returns?
No.
What is the process for obtaining a loan?
NRS- The employee must contact the plan administrator at 877-677-3678 to request a loan package and answer a few questions to be screened for eligibility. The employee completes the loan application and returns it to the plan administrator.
ICMA-RC- The employee may request the loan package via telephone at 800-669-7400 or may complete the request via their website.
How long does it take for the Plan to process a completed loan application?
It takes two to three business days to process the loan request. The employee should receive payment within a week thereafter.
How often may an employee take a loan?
Only one loan is allowed per calendar year.
How many loans may an employee have outstanding at one time?
Employees will be allowed to have only one loan outstanding at a time.
What is the interest rate?
The interest rate for ICMA-RC, is based on the prime rate + 0.5%. The interest rate, for NRS, is prime + 1%.
Who receives the interest on loan repayments?
The interest is credited to the participant’s account.
What is the repayment method?
ICMA-RC and NRS will be performing all administrative functions related to the establishment and repayment of loans. Loans must be repaid from the participant’s bank account via ACH. Repaying the loan through payroll deductions is not an option.
Is there a penalty for paying off the loan early?
No, there is no early payoff penalty.
May an employee continue to make biweekly payroll deferred compensation contributions while repaying a loan?
Yes.
What happens if an employee terminates employment with an outstanding loan?
The employee may continue to repay the loan via ACH.
Where do I call to request additional information?
ICMA-RC participants must contact ICMA-RC at 800-669-7400. NRS participants must contact NRS at 877-677-3678.
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