New Jersey Administrative Code
Title 17 - TREASURY - GENERAL
Chapter 7 - ALTERNATE BENEFIT PROGRAM
Subchapter 14 - LOANS-ABP RETIREMENT PLAN, ACTS, AND CLOSED PLAN
Section 17:7-14.1 - Loan permitted

Universal Citation: NJ Admin Code 17:7-14.1

Current through Register Vol. 56, No. 6, March 18, 2024

(a) A participant may borrow from his or her employee account up to the amounts allowed under Federal law while still employed. The employee account and employer account shall be used solely to qualify for the amount of a policy loan.

1. Terms of loans. All loans shall be made on such terms and conditions as the Plan Administrator may determine and in accordance with the rules and procedures of the applicable DSP, provided that all loans:
i. Shall be made pursuant to a promissory note and such other documents required by the pension provider, which are subject to default rules that are not inconsistent with (a)5 below and which are secured by the employee account and employer account and such other collateral as may be required by the Plan Administrator;

ii. Shall be amortized on a substantially level basis, with payments to be made not less frequently than quarterly throughout the repayment period, except that the loan may be prepaid fully, and except that alternative arrangements for repayment may apply in the event the borrower is on a bona fide unpaid leave of absence for a period not to exceed one year for leaves other than a qualified military leave within the meaning of IRC § 414(u) or for the duration of a leave which is due to qualified military service;

iii. Shall bear a reasonable rate of interest (which may be a fluctuating rate), which shall in no event be lower than the prime interest rate, as published in the Wall Street Journal on the last business day of the month, plus two percentage points;

iv. Shall provide for repayment in full on or before the earlier of:
(1) Five years after the date when the loan is made or 20 years after the date the loan is made if the loan is used to acquire a dwelling which, within a reasonable period of time, is to be used as the principal residence of the participant; or

(2) The date when distribution of the participant's Plan benefit is fully distributed (including payments after retirement out of Plan distributions); and

v. At the discretion of the DSP, the employee account of a participant who elects to borrow may be charged with loan fees and additional fees in an amount reasonably determined by the Plan Administrator to represent the cost to the Plan of processing the loan.

2. Amount of loan. The minimum amount of any new loan made to a participant shall be established by, and be subject to the loan rules and procedures of, the applicable DSP. The maximum amount of any new loan made to a participant shall be offset by the balance (principal plus accrued interest) due on any outstanding loans to the participant from the ABP Retirement Plan and ACTS (and from any other plans of the employer that are qualified employer plans under IRC § 72(p)(4)). In accordance with IRC § 72(p)(2), the principal amount of the new loan shall not exceed the lesser of:
i. Fifty thousand dollars, reduced by the greater of:
(1) The outstanding balance on any loan from the Plan (and from any other plans of the employer that are qualified employer plans under IRC § 72(p)(4)) to the participant on the day the loan is made; or

(2) The highest outstanding loan balance on loans from the ABP Retirement Plan (and from any other plans of the employer that are qualified employer plans under IRC § 72(p)(4)) to the participant during the 12-month period ending on the day before the date on which the new loan is made (not taking into account any payments made during such 12-month period); or

ii. The greater of:
(1) Fifty percent of the value of the participant's vested accounts (as of the valuation date immediately preceding the date on which such loan is approved by the employer); or

(2) $ 10,000.

3. Source of loans. The amount to be borrowed by the participant shall come from assets held in the employee account or rollover account and any loan shall be considered an asset of such accounts.

4. Withholding and application of loan payments. Principal and interest payments shall be made:
i. Whenever possible through periodic payroll deductions from the participant's base salary from the employer; or

ii. By bank or cashier's check or money order whenever payroll withholding is not possible.

5. Default. Prior to repayment, a promissory note shall be considered in default in the event the borrower fails to make a payment when due and subsequently fails to make up such payment by the last day of the calendar quarter following the calendar quarter in which the payment was missed, dies, or terminates his or her participation in the Plan, the borrower files for relief under the United States Bankruptcy Code, the loan becomes a deemed distribution under IRC § 72(p), or the Plan is terminated. In the event a default occurs and is not cured within any grace period set forth in the promissory note, the full amount due under the note shall become immediately due and payable. In such event, the loan coordinator shall take such actions as it deems necessary or appropriate to cause the Plan to realize on its security for the loan.

6. Administrative rules and procedures. The loan coordinator may adopt such administrative rules and procedures applicable to the administration of this section as he or she may deem necessary or appropriate. Such rules and procedures may be more restrictive than the provisions of this section provided that these rules and procedures are nondiscriminatory in effect, prospectively applied, and permitted under the IRC and regulations thereunder.

7. Delayed vested participant. A participant who is in delayed vested status pursuant to 17:7-6.2 is not eligible to receive a loan.

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