N.Y. Education Law § 512-b: Loans

§ 512-b. Loans. 1. Any member in active service or on leave of absence

who has credit for at least one year of member service may borrow from

his accumulated contributions in the retirement system once during each

six month period an amount of not less than three hundred dollars

providing the retirement board shall approve such loan. The total of any

such loans shall not exceed seventy-five per centum of his accumulated

contributions.

2. Repayment. An amount so borrowed, together with interest on any

unpaid balance thereof, shall be repaid in equal installments which

shall be made by the borrower directly to the retirement board or, with

the consent of the employer, through regular payroll deduction. The

state comptroller is authorized to provide through regular payroll

deduction for such repayment of loans made by employees of the state of

New York. Such installments shall be in such amount as the retirement

board shall approve; however, they shall be at least (a) two percent of

the member's contract salary, and (b) sufficient to pay the interest on

the unpaid balances thereof. In the event that a member is on leave of

absence without pay or is not regularly employed by an employer subject

to the provisions of this article, any such outstanding loan shall be

repaid in such installments of principal and interest as the retirement

board shall determine. In the event of default the retirement board

shall be authorized to collect such payments due from the employer of

such member through payroll deduction and such member shall forfeit all

future entitlement to borrow from the retirement system until the unpaid

balance of the loan outstanding at the time of default is fully paid.

The retirement board, at any time, may accept payments on account of any

loan in addition to the installments fixed for repayment thereof. All

payments of principal and interest at the minimum rate permitted

pursuant to subdivision three of this section made by the member shall

be credited to his accumulated contributions. Any additional interest

paid by the member shall be credited to the pension accumulation fund.

3. Interest. The rate of interest payable upon loans made pursuant to

this section shall be set by the retirement board. The retirement board

shall have power, from time to time and at any time, to decrease such

rate to not less than that currently being credited on the member's

accumulated contributions or to increase the same to not more than six

per centum per annum. Any such decrease or increase shall apply, from

the effective date thereof, to unpaid balances of loans outstanding on

such date and to new loans made thereafter.

4. Service Charge. A uniform service charge payable upon loans made

pursuant to this section shall be set by the retirement board in an

amount sufficient to cover the cost to the retirement system of

administering the loans. Such charge shall be deducted from the member's

accumulated contributions when the loan is made or in equal annual

installments over the period the loan is outstanding.

5. Insurance. Each loan made pursuant to this section shall be insured

against the death of the member in an amount equal to the amount of the

loan outstanding at any given time; with the exception that until thirty

days have elapsed after the making thereof no part of the loans shall be

insured. Such insurance shall be provided by the retirement board

through the retirement system. Upon the death of the member the amount

of insurance so payable shall be credited to his accumulated

contributions. The premium payable by the member for such insurance

shall be set by the retirement board at a rate of not to exceed one per

centum of the amount loaned.

A premium of one per centum per annum of the amount loaned, prorated

to July first next, shall be deducted from the accumulated contributions

of the member when the loan is made. Thereafter, a premium of one per

centum per annum of the present value of the outstanding loan as of July

first shall be deducted from the accumulated contributions of the member

each succeeding year until such loan is repaid or the member is retired.

The retirement board in its discretion on any July first may increase

or reduce the premium, modify the terms or conditions of coverage, or

discontinue the insurance of loans. In no event shall this subdivision

impose any obligation upon the retirement board to continue to insure

loans of members upon the terms and conditions herein provided or upon

any other terms or conditions.

6. Special Funds. The retirement board is authorized to establish such

funds as may be necessary to carry out the provisions of subdivisions

four and five of this section.

7. Withdrawals and retirements when loan is outstanding. Whenever a

member becomes entitled to the return of his accumulated contributions

because of withdrawal from the system or because of having become

eligible for a death benefit or a retirement allowance or because of an

election to withdraw his accumulated contributions pursuant to

subdivision six of section five hundred sixteen of this article the

amount of any loan outstanding on such date shall be construed to have

been already returned to such member and the accumulated contributions

to which he shall then be entitled shall be the net amount of such

contributions together with interest thereon standing to his credit in

the annuity savings fund on such date.

8. Rules and Regulations. The retirement board is authorized to adopt

such rules and regulations as it finds to be necessary in administering

the provisions of this section. Anything in this section

notwithstanding, the retirement board is authorized to adopt rules and

regulations permitting a loan at any time prior to retirement to a

teacher who is not in active service or on leave of absence, provided

such loan would otherwise be permitted under this section and under

applicable provisions of the Internal Revenue Code relating to loans

from pension plans.

9. The retirement board shall have the power to discharge any evidence

of a loan to a member pursuant to this section upon the satisfaction of

the obligation of the member thereunder.