Loan Frequently Asked Questions

1. How many loans are allowed? The number of loans outstanding varies by plan. Please see your plans Loan Policy for more details. The plans loan policy can be obtained from your plan administrator.

2. What is the amount I can borrow?

Generally, you can borrow up to 50% of your vested account balance or $50,000 less the highest outstanding loan balance in the past 12 months, whichever is less.

Loans are limited to 50% of your vested account balance up to a maximum of $50,000. If you had an outstanding loan or loans during the 12-month period ending the day before your new loan, you must reduce the $50,000 limit by the highest outstanding loan balance during that period, less the outstanding balance on the day before the new loan is made, and a new loan, when added to the outstanding balance of any existing loans, cannot exceed this limit.

Example:

If your vested balance is $110,000 and you have a $10,000 loan outstanding, and your highest balance on the loan over the previous 12 months was $15,000, your new loan availability would be $35,000 calculated as follows:

$50,000 = Maximum loan limit -$5,000 = Difference between highest outstanding balance ($15,000) and current balance ($10,000) -$10,000 = Current outstanding loan balance. =$35,000 = New loan available amount.

3. Is there a fee to process a loan?

There is a processing fee charged to offset the cost of administering and recordkeeping the loan. The fee is deducted from the remaining balance of your account; not from the loan amount requested. The fee is non-refundable. The amount of the fee, if any, will be displayed on the loan request page.

4. How is the interest rate determined?

The interest rate charged for a loan from your account is determined by the Plan Administrator, and can be found in the plans loan policy.

5. Who receives the interest I pay on the loan?

Both the interest and the principal are paid back into your retirement plan account.

6. What is the minimum amount I can borrow? The minimum amount is determined by the plan and is displayed on the loan request screen.

7. How are loan payments made?

The loans are paid back only through payroll deductions. These deductions are set up automatically once the loan is requested. The loan is paid back with after-tax deductions from your paycheck.

8. How do I change my payment amount or make extra payments?

Please be aware that once the loan is requested, the payment amount cannot be modified. As mentioned above, payments can only be made through payroll deductions.

Loan Frequently Asked Questions (continued)

9. How long will it take to process my loan? A general loan will process within 2-3 business days. For a primary residence loan, once the paperwork is received and complete, it will be processed within 3-5 business days. The checks are sent through USPS First Class Mail and we ask you allow 7 to 10 business days for the check to arrive.

10. Can the loan be paid back early?

Yes, loans can be paid back in full at any time, without penalties or fees. Please print off the loan pre-payment form and mail that to the address at the bottom of the form. A cashiers check or money order must accompany the form. Personal checks are not accepted. The form will have the payoff amount and payee.

11. What is the timeframe for posting an early loan payoff?

Once ADP receives the certified check along with the loan payoff form in good order, the payoff will post to your account within 3 to 5 business days.

12. What happens to the loan if I terminate/quit/leave my employment?

You need to pay the loan back in full within 90 days from the date of the last payment received. A loan that is not repaid will be considered a deemed distribution and will become a part of your taxable income for the year. Additionally, an early withdrawal penalty may apply for a deemed distribution if you are younger than age 59.

13. My loan has deemed, yet it is still reflected on my account and is accruing interest. Why? A loan that has been deemed a distribution is still considered an outstanding loan. The interest will continue to accrue on the balance until the loan is paid off, or there is a distributable event that offsets the outstanding loan amount. Paying off a deemed loan will not reverse its tax liability.

14. Can I roll the loan over to my new retirement plan?

No. If your loan is still outstanding at the time you distribute your account, the loan will become a taxable distribution, even if you rollover your remaining balance.