Loans Now available in the Optional Retirement Program
Dear Optional Retirement Program (ORP) Participant:
The SUNY Board of Trustees adopted a resolution permitting loans under the ORP. Employees will be permitted to take one loan per carrier per twelve-month period. Interest will be charged and the loan must be repaid within a five-year period, unless it is used to fund the purchase of a primary residence.
All loans are governed by IRS regulations, which set a maximum loan balance of $50,000 or half of value of the your ORP contracts, whichever is less. It is your responsibility to ensure that this limit is not exceeded. Carriers may have their own regulations, which result in a lesser amount of funds being available.
Employees may wish to consider the following before requesting a loan from their retirement account. First, there are serious tax consequences if you are unable to repay the loan in accordance with the terms. If the loan is in default, it will be considered a "deemed distribution" and the outstanding loan balance (including accrued interest) will be reported to the Internal Revenue Service (IRS) as current taxable income, which may result in a substantial and immediate tax liability. In addition, if you are under 59 ½, your default may also be subject to an additional 10% federal tax penalty for an early distribution. A loan default will also reduce the retirement income an employee will receive and will impact the maximum permitted amount of any subsequent loan. Employees may also wish to consider that interest paid on the retirement loan is not tax deductible; this tax advantage may be available through other loan options. Additional information regarding the loan provision and the specific requirements of the carrier is available by contacting your ORP carrier(s) directly: