AAC-17-12-00017-P Loans to Members of the Retirement System

4/25/12 N.Y. St. Reg. AAC-17-12-00017-P

NEW YORK STATE REGISTER

VOLUME XXXIV, ISSUE 17

April 25, 2012

RULE MAKING ACTIVITIES

DEPARTMENT OF AUDIT AND CONTROL

PROPOSED RULE MAKING

NO HEARING(S) SCHEDULED

 

I.D No. AAC-17-12-00017-P

Loans to Members of the Retirement System

PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following proposed rule:

Proposed Action:

This is a consensus rule making to amend Part 351 of Title 2 NYCRR.

Statutory authority:

Retirement and Social Security Law, sections 11 and 311

Subject:

Loans to members of the retirement system.

Purpose:

To implement the procedural rules necessary to administer the loans provisions of the RSSL for Tiers 5 and 6.

Text of proposed rule:

PART 351. LOANS TO TIER 3, [AND] 4, 5 AND 6 MEMBERS

Section 351.1.* Background.

(a) Chapter 920 of the Laws of 1990 created a statutory program under which Tier 3 (Retirement and Social Security Law, section 517-c) and Tier 4, 5 and 6 (Retirement and Social Security Law, section 613-b) members of the New York State and Local Employees' Retirement System may borrow from their accumulated member contributions. Chapter 171 of the Laws of 2011 created such a program for Tier 5 and 6 (Retirement and Social Security Law, section 1207) members of the New York State and Local Police and Fire Retirement System. Sections 517-c, [and] 613-b and 1207 expressly authorize the retirement systems to adopt rules and regulations for administering the provisions of those sections. Sections 519 and 614 of the Retirement and Social Security Law authorize the Comptroller to adopt rules and regulations governing procedural matters applicable to Tier 3 and 4 members of the retirement system.

(b) Pursuant to such authority, this Part is being promulgated to implement procedural rules the retirement systems find necessary to administer the loan provisions, and to provide a clear and consolidated restatement of the rules provided in Retirement and Social Security Law, sections 517-c, [and] 613-b and 1207.

Section 351.2.* Maximum loan amount.

A member may not borrow more than 75 percent of his or her accumulated contributions. In the case of a loan to a member who already has an outstanding loan balance from a previous loan or loans, the amount of such loan may not exceed an amount, which when added to the outstanding balance of previous loans, will exceed 75 percent of the member's accumulated contributions. The amount of all loans outstanding shall not exceed the limitations of Internal Revenue Code section 72(p).

Section 351.3.* Application for loans.

Applications for loans shall be executed by members on forms prepared by the retirement system.

Section 351.4.* Frequency of loans.

A member may only borrow once during any 12-month period.

Section 351.5.* Rate of interest.

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 the retirement systems. However, in no event shall such rate be less than the rate set forth in subdivision (c) of section 517 of the Retirement and Social Security Law, with respect to Tier 3 members of the New York State and Local Employees' Retirement System, or the rate set forth in subdivision (c) of section 613 of the Retirement and Social Security Law, with respect to Tier 4, 5 and 6 members of the New York State and Local Employees' Retirement System. Any change in the interest rate shall become effective on April 1st. However, the rate of interest applicable to any loan shall be fixed at the time the loan is made and shall not be affected by subsequent changes in the rate of interest applicable to new loans.

Section 351.6.* Repayment.

(a) Amounts borrowed, together with interest on any unpaid balance, shall be repaid in equal installments which shall be in such amount as the retirement system shall approve; however, they shall be at least two percent of the member's salary and sufficient to repay the amount borrowed, together with interest on the unpaid balances thereof, within a period not in excess of five years.

(b) In the case of a member employed in public service of the State or a participating employer in the retirement system, repayment in such installments shall be made through regular payroll deductions.

(c) In the case of a member who has separated from the service of the State or participating employer in the retirement system, payment shall be made directly to the retirement system in installments of not less than $50; provided further that only one payment may be made during any calendar month.

(d) The member shall pay a service charge on each loan, to be deducted at the time the loan is made. The service charge on loans shall be at a rate to be determined, from time to time, by the Comptroller. Any change in the applicable service charge shall become effective on April 1st and applicable to all loans made during the fiscal year (April 1st - March 31st).

(e) Loan repayments will be suspended during a member's period of military service in accordance with the provisions of Section 414(u) of the Internal Revenue Code of 1986, as amended.

Section 351.7.* Loan insurance.

All loans shall be covered by loan insurance commencing 30 days following the date of the making of the loan, as required by sections 517-c, [and] 613-b and 1207 of the Retirement and Social Security Law. Changes in the loan insurance rate shall become effective on April 1st.

Text of proposed rule and any required statements and analyses may be obtained from:

Jamie Elacqua, Office of the State Comptroller, 110 State Street, Albany, NY 12236, [phone], email: [e-mail]

Data, views or arguments may be submitted to:

Same as above.

Public comment will be received until:

45 days after publication of this notice.

Consensus Rule Making Determination

This is a consensus rulemaking proposed for the purpose of implementing the procedural rules of the retirement system necessary to administer the loan provisions of the RSSL. These amendments solely relate to such procedural rules and it has been determined that no person is likely to object to the adoption of the rule as written.