There are two types of loans: 1) Hardship Loans and 2) General Purpose Loans (loans for any other reason).
- The minimum amount of a loan is $1,000.
- General Purpose Loan: Any loan or loans cannot collectively exceed 50% of the vested balance in your account; or $10,000, whichever is less. You may only take out one General Purpose Loan during any twelve (12) consecutive months.
- Hardship Loan: A Hardship Loan or loans from the Money Purchase Plan (based on contributions made on your behalf prior to February 1, 2010) cannot collectively exceed 50% of the vested balance in your account; or $50,000, whichever is less. Hardship Loans require that you have an immediate and heavy financial need and the hardship loan is in an amount up to the amount of the need. Specifically, the financial need is due to any one or more of the following reasons:
- Medical care expenses (already incurred or necessary in the future) for you or your dependent. Medical Care expenses include expenses for the diagnosis, cure, mitigation, treatment, or prevention of disease, as well as for transportation primarily for and essential to this medical care.
- Tuition and related educational fees for the next 12 months for post-secondary education for you or your dependent. Related educational fees include fees, books, equipment required for and courses of instruction and room and board.
- Down payment and other costs directly related to the purchase of your primary residence (excluding mortgage payments).
- Payments to prevent your eviction from your principal residence or foreclosure on the mortgage of your principal residence.
You will be required to submit any documents to support the need and reason for a hardship loan as may be determined in the discretion of the Trustees.
- For ALL loans, you must apply for a loan by completing and submitting a loan application to the Loan Administrator. You must provide documentation as required by the Loan Administrator, including a promissory note to the principal amount and the interest payable.
- The interest rate is fixed by the Trustees and will be changed periodically so that it is approximately 1% over the prime interest rate being charged by a local financial institution designated by the Trustees. The Trustees reserve the right, in their discretion, to modify the interest rate at any time.
- The maximum repayment period is five (5) years; however, you may repay the loan faster without any penalty.
- You may have more than one loan outstanding, but you cannot receive more loans if you are in default on any loan.
- Only active participants are eligible for loans. Loans are not available to alternate payees, beneficiaries, or former participants.
- You must obtain consent from your spouse or show that consent cannot be obtained as described in the section Spousal Consent for Loans or Hardship Withdrawals.
- If you fail to make timely payment of principal and interest, and if such failure remains uncorrected on the last day of the calendar quarter following the calendar quarter in which the failure occurred (“cure period”), then the loan is considered in default. If you fail to make a timely payment, the Loan Administrator will send you notice to correct the default within the cure period. If you fail to make timely correction, the Plan will foreclose on your benefit(s) which secures the loan in accordance with the following:
- If, at the end of the cure period, you are entitled to a distribution from the Plan, because of termination of employment, the unpaid balance of principal and interest of the delinquent loan will be offset against your benefit(s) and constitute a distribution.
- If, at the end of the cure period, you have not incurred a distribution event, then the offset procedure set forth above will not be instituted and no further action will be taken until you terminate employment, die, or have any other distributable event under the terms of the Plan. At that time, your account(s) will be offset and foreclosure of the loan deemed completed.
- If your loan is not repaid in accordance with its terms and it is not possible to foreclose on the security as described above, then your loan will be considered a distribution. Immediately following the end of the cure period, the outstanding balance of the loan will become taxable as if it had been distributed and a Form 1099-R will be issued to you.
- If you terminate employment, you may continue to repay the loan. However, if you elect to receive a distribution of your account, then the loan will be in default and must be repaid in full prior to distribution of your account and the loan, including interest will be offset against the distribution.
John has $100,000 in his account when his employment ends. He has an outstanding loan of $20,000. John elects to receive his account balance in one lump sum. He will receive:
John’s account balance $100,000
Outstanding loan amount $20,000
John will receive a distribution of $76,000, based on a Total Distribution of $120,000 less 20% for federal taxes ($24,000), less the Loan Payoff of $20,000, which equals a final distribution of $76,000. John will receive a 1099-R showing a $120,000 taxable distribution although the final distribution is $76,000. If John is under age 59½, he will have to pay an additional 10% penalty for the distribution. See the section, Concerning Taxes, for additional information.