Sec. 5004.9. The effect on unpaid loans of death, retirement, withdrawal or transfer to another retirement system for Tier 3 through 6 members

(a) Whenever a member for whom a loan is outstanding becomes entitled to the return of his or her contributions because of withdrawal from the system or death (in the case of an uninsured loan), the amount of any loan outstanding on such date, including accrued interest, shall be construed to already have been returned to such member and the refund of contributions to which he or she shall then be entitled shall be the net amount of such contributions, together with interest thereon, pursuant to Retirement and Social Security Law, section 517(c) or 613(c).

(b) Whenever a member 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. Such life annuity shall be calculated utilizing the average annual percentage interest rate on the nominal 10-year United States Treasury constant maturity obligations as published in the Federal Reserve Selected Interest Rates H.15 Historical Data report for the days during the calendar year preceding the calendar year in which the retirement becomes effective, truncated to two decimal places and pursuant to the mortality tables for options available under Retirement and Social Security Law, section 514 or 610.

(c) Whenever a member for whom a loan is outstanding transfers to another public retirement system, this system shall transfer to the retirement system to which the member is transferring the difference between the full value of the member's contributions as of the date of transfer as if there were no loan outstanding and the member's outstanding loan balance with interest at the time of the transfer.