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This entry was published on 2021-08-06
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SECTION 1207
Loans to members
Retirement & Social Security (RSS) CHAPTER 51-A, ARTICLE 22
§ 1207. Loans to members. a. 1. Notwithstanding any general, special
or local law to the contrary, a member in active service who has credit
for at least one year of member service may borrow, no more than once
within each twelve month period, an amount not exceeding seventy-five
percent of the total contributions made pursuant to section twelve
hundred four of this article or any other article of this chapter and
not less than one thousand dollars.

2. A member who first joins such system on or after January first, two
thousand eighteen 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 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 twelve hundred
four 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 system or through regular
payroll deduction. Such installments shall be in such amount as the
retirement system shall approve; however, they shall be at least (a) two
percent of the member's contract salary, and (b) 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,
the retirement system 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. The retirement system, 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 rates set forth in 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 be one percent less than the valuation rate of interest
adopted for such system. 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 system 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. 1. 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 loan shall be
insured. Such insurance shall be provided by 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 system at a rate not to
exceed one percent of the amount loaned.

2. Such premium shall be prorated to July first next, or such other
date fixed by the retirement system as is appropriate, 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, or such other
appropriate date, shall be paid in the same manner each succeeding year
until such loan is repaid or the member is retired.

3. The retirement system 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 system to continue to insure loans of members upon the terms
and conditions herein provided or upon any other terms or conditions.

f. The retirement system is authorized to establish such 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 d 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.

h. Notwithstanding any general or special law to the contrary,
whenever a member of the 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 five hundred fourteen of this chapter.

i. The retirement system shall adopt such rules and regulations as it
finds to be necessary in administering the provisions of this section.

j. The retirement system shall discharge any evidence of a loan to a
member pursuant to this section 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.