N.Y. Retirement & Social Security Law § 1207: Loans to members

§ 1207. Loans to members. a. 1. Notwithstanding any general, special

or local law to the contrary, a member in active service who has credit

for at least one year of member service may borrow, no more than once

within each twelve month period, an amount not exceeding seventy-five

percent of the total contributions made pursuant to section twelve

hundred four of this article or any other article of this chapter and

not less than one thousand dollars.

2. A member who first joins such system on or after January first, two

thousand eighteen in active service who has credit for at least one year

of member service may borrow, no more than once during each twelve month

period, an amount, not less than one thousand dollars and which would

not cause the balance owed pursuant to this section, including any

amounts borrowed then outstanding, to exceed (i) fifty percent of the

member's total contributions made pursuant to section twelve hundred

four of this article (including interest credited at the rate set forth

in subdivision c of this section compounded annually); or (ii) fifty

thousand dollars, whichever is less.

b. 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 system or through regular

payroll deduction. Such installments shall be in such amount as the

retirement system shall approve; however, they shall be at least (a) two

percent of the member's contract salary, and (b) sufficient to repay the

amount borrowed, together with interest on unpaid balances thereof,

within a period not in excess of five years. In the event of default,

the retirement system 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 system, 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 rates set forth in subdivision c of this section made by

the member shall be credited to his or her account as principal or

interest. Any additional interest paid by the member shall be credited

to the appropriate fund of the retirement system.

c. The rate of interest payable upon loans made pursuant to this

section shall be one percent less than the valuation rate of interest

adopted for such system. Whenever there is a change in the interest

rate, it shall be applicable to loans made or renegotiated after the

date of such change in the interest rate.

d. A service charge payable upon loans made pursuant to this section

shall be set by the retirement system in an amount sufficient to cover

the cost to the retirement system of administering the loans. Such

charge shall be paid to the retirement system when the loan is made or

in equal installments over the period the loan is outstanding. The

amount of the service charge shall be credited to the fund from which

administrative expenses are paid.

e. 1. 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 loan shall be

insured. Such insurance shall be provided by the retirement system. Upon

the death of the member, the amount of insurance so payable shall be

credited to his or her account. The premium payable by the member for

such insurance shall be set by the retirement system at a rate not to

exceed one percent of the amount loaned.

2. Such premium shall be prorated to July first next, or such other

date fixed by the retirement system as is appropriate, and shall be paid

to the retirement system in equal installments over the period of the

loan. Thereafter, a premium not to exceed one percent per annum of the

present value of the outstanding loan as of July first, or such other

appropriate date, shall be paid in the same manner each succeeding year

until such loan is repaid or the member is retired.

3. The retirement system shall, at least annually, review such premium

rate, and may, in its discretion, 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 system to continue to insure loans of members upon the terms

and conditions herein provided or upon any other terms or conditions.

f. The retirement system is authorized to establish such special funds

as may be necessary to carry out the provisions of subdivisions d and e

of this section.

g. Whenever a member of such a retirement system, for whom a loan is

outstanding, becomes entitled to the return of his or her contributions

because of withdrawal from such system or because of death, the amount

of any loan outstanding on such date, including accrued interest as

provided in subdivision d of this section, shall be construed to already

have been returned to such member and the refund of contributions to

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

contributions together with interest thereon.

h. Notwithstanding any general or special law to the contrary,

whenever a member of the retirement system, for whom a loan is

outstanding, retires, the retirement allowance payable without optional

modification shall be reduced by a life annuity which is actuarially

equivalent to the amount of the outstanding loan (all outstanding loans

shall continue to accrue interest charges until retirement), such life

annuity being calculated utilizing the interest rate on thirty year

United States treasury bonds as of January first of the calendar year of

the effective date of retirement and the mortality tables for options

available under section five hundred fourteen of this chapter.

i. The retirement system shall adopt such rules and regulations as it

finds to be necessary in administering the provisions of this section.

j. The retirement system shall discharge any evidence of a loan to a

member pursuant to this section upon the satisfaction of the obligation

of the member thereunder.

k. The retirement system shall have no right to bring suit in any

court against any member to enforce the amount due under this section,

and the retirement system's sole remedy upon death, retirement or

withdrawal shall be to offset the amount outstanding including interest

from the member's account or other benefits payable to or on behalf of

the member as provided in this section.