Summary Plan Description Table of Contents
Loans
Realizing that there may be times when you may need to draw upon the money in your Individual Account, the Plan includes a loan program. Since a loan removes assets from your Plan investments for retirement, many financial advisors caution against taking loans since it may affect the amount you ultimately accumulate for retirement. Although the interest you pay on loans goes to your Plan account, that interest rate return to your account may be less than the returns from the investment option from which the loan was taken.
Eligibility and Application
You are eligible to apply for a loan if you are currently a Participant in the Plan; this includes former Employees who are not currently working in Covered Employment and/or Industry Employment. If you are married, your spouse must consent to your loan in writing and her consent must be witnessed by an authorized Plan representative or Notary Public.
Loans are not available to beneficiaries or alternate payees. In addition, you may not have more than one outstanding loan at any time. Finally, if you default on a loan, you are no longer eligible for another loan, even if you repay the defaulted loan.
Loan Amount
The minimum loan amount that you may request is $1,000. The maximum loan amount is the lesser of:
- $50,000 minus your highest outstanding principal balance of loans during the preceding one year period; or
- The greater of 50% or $10,000 of the vested balance in your Individual Account.
There is a one-time, non-refundable loan-processing fee of $25 for each loan. This amount is deducted from your Individual Account at the time the loan is approved. This amount is subject to change from time to time and you will be notified of any such change.
Loans are taken on a pro-rata basis from your investment options. This means that a proportionate amount of money is taken from each investment option in which you have your money invested.
Interest
You are required to pay interest on the loan. Unless the Trustees direct the service provider otherwise, the service provider will make any necessary rate changes based upon the “bank prime rate” plus 1% reported by the U.S. Federal Reserve on the last business day of a calendar quarter effective for loans made on and after the first business day of the subsequent quarter. The source of the rate will be www.federalreserve.gov or other websites that may provide the same information.
The interest rate on Participant loans will be declared quarterly; however, the Plan reserves the right to change the basis for determining the interest rate prospectively with thirty (30) days’ notice. The rate of interest to be applied to any loan shall be that in effect on the date of the loan application and a subsequent change in the interest rate shall not be applied to any loan for which application has previously been made.
Repayment
After your loan application is approved, you must:
- Sign a promissory note;
- Provide any other requested documents; and
- Make monthly loan payments.
The amount of the monthly loan payment will remain constant throughout the term of the loan. It is your responsibility to make payments.
You must repay your loan within five years. However, you may pay off your loan any time before the due date without penalty.
Default
If the Plan does not receive a repayment from you by the due date for any reason, that will be a loan default unless payment is made and received by the Plan within the grace period. The grace period ends within 60 days after each due date of the repayment. In addition, any of the following occurrences will be considered a default:
- Your death;
- Any statement or representation by you in connection with the loan which is false or incomplete in any material respect;
- Failure to perform or comply with any obligations imposed by any agreement executed by you securing your loan obligation; and any other conditions or requirements set forth within a Promissory Note or Truth in Lending Statement and other Loan Documentation.
If you default on a loan, the amount of the unpaid loan plus accrued interest will generally result in taxable income on the year of default. You (or your beneficiary if the default results from your death) will receive a 1099R showing the taxable amount. The 10% penalty tax may also apply if the default occurs before you are age 59½ unless another exception applies.
If you default on a loan, you are no longer eligible for another loan, even if you repay the defaulted loan.
Leaves of Absence Including Military Leave
There are suspension provisions that may apply to your loan when you are on a military leave or other unpaid leave. Be sure to contact the Fund Office for more information before you go on military leave or other unpaid leave.