N.Y. Retirement & Social Security Law § 613-a: Loans to members of a teachers' retirement system

§ 613-a. Loans to members of a teachers' retirement system. a. 1. A

member of a teachers' retirement system 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 exceeding seventy-five

percent of the total contributions made pursuant to section six hundred

thirteen of this article (including interest credited at the rate set

forth in subdivision c of section six hundred thirteen compounded

annually) and not less than one thousand dollars.

2. A member of the New York state teachers' retirement system who

first joins such system on or after July first, two thousand twenty-two

in active service and 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 six hundred thirteen 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 board or through regular payroll

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

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

the member's contract salary, and (ii) 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 such

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. Such 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

lower of the rates set forth in either subdivision c of section six

hundred thirteen of this article or 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: (i) for members of the New York state teachers'

retirement system, be one percent less than regular interest pursuant to

paragraph (b) of subdivision nine of section five hundred one of the

education law, however in no event shall the rate be less than the rate

set forth in subdivision c of section six hundred thirteen of this

article; (ii) for members of the New York city teachers' retirement

system, be one percent less than the regular interest rate established

pursuant to paragraph (d) of subdivision twenty-two of section 13-501 of

the administrative code of the city of New York for such system, however

in no event shall the rate be less than the rate set forth in

subdivision c of section six hundred thirteen of this article. 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 board 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. 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 or her account. The

premium payable by the member for such insurance shall be set by the

retirement board at a rate not to exceed one percent of the amount

loaned.

Such premium shall be prorated to July first next 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 shall be paid in the same

manner each succeeding year until such loan is repaid or the member is

retired.

The retirement board 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 board to continue to insure loans of members upon the

terms and conditions herein provided or upon any other terms or

conditions.

f. Such a retirement board is authorized to establish 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 c 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 pursuant to subdivision c

of section six hundred thirteen of this article.

h. Notwithstanding the provisions of subdivision b of section six

hundred twelve of this article, whenever a member of such a 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

six hundred ten of this article. Notwithstanding the preceding sentence,

in the case of the New York state teachers' retirement system,

commencing January first, two thousand four, the interest rate on ten

year United States treasury obligations as of January first of the

calendar year of the effective date of retirement shall be used.

Notwithstanding the preceding sentence, in the case of the New York

state teachers' retirement system, commencing January first, two

thousand sixteen, the average annual interest rate on ten year United

States treasury obligations for the days during the calendar year that

precedes the calendar year in which the retirement becomes effective

shall be used.

i. Such a 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 of the New York state teachers' retirement system is

authorized to adopt rules and regulations permitting a loan at any time

prior to retirement to a member who is not in active service, 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.

j. Such a retirement board shall discharge any evidence of a loan to

member pursuant to this subdivision 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.