from your retirement account loans - maryland · 2016-03-24 · facebook “f” logo cmyk / .eps...

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LOANS Maryland Teachers and State Employees Supplemental Retirement Plans MARYLAND T EACHERS AND STATE EMPLOYEES SUPPLEMENTAL RETIREMENT PLANS 11350 McCormick Rd, Executive Plaza 1, Ste 400 Hunt Valley, MD 21031 800-545-4730 Nationwide is the administrator for MSRP. Nationwide Investment Services Corporation (member, FINRA), an affiliate of Nationwide, provides educational and enrollment services on behalf of MSRP. Financial & Realty Services, LLC may provide education and marketing support services on behalf of Nationwide. Its Retirement Consultants are registered representatives of FSC Securities Corporation (FSC), member FINRA, SIPC. FSC and Financial & Realty Services, LLC are not affiliated with MSRP, Nationwide or NISC. Nationwide and Nationwide Life Insurance Company (collectively “Nationwide”) have endorsement relationships with the National Association of Counties, and the International Association of Fire Fighters-Financial Corporation. More information about the endorsement relationships may be found online at www.nrsforu.com. Nationwide is a service mark of Nationwide Mutual Insurance Company. © 2016 Nationwide NRM-3604MD.10 (02/16) MarylandDC.com facebook.com/msrp twitter.com/msrp Your guide to the MSRP Loan Program or NOT Advantages & disadvantages of borrowing from your retirement account Advantages No credit check—you’re essentially “borrowing from yourself.” No taxes to pay as long as repayments are received on time and other conditions are satisfied. Competitive interest rates— generally “Prime Rate” + 1%. You essentially “pay interest to yourself,” rather than a conventional lender. Reasonable repayment terms— one to five years for general purpose loans and up to fifteen for primary residence loans. Taking a loan from your MSRP account can be a benefit— or a potential liability. Understanding potential advantages and disadvantages of borrowing from your retirement account may help avoid misunderstanding in the future. Disadvantages Payments are made with after-tax dollars, rather than pre-tax contributions. On defaulted loans, the entire outstanding loan amount and accrued interest is subject to income taxes and possible additional tax. Any defaulted loan will continue to be an obligation which accrues interest until the loan is either repaid or offset. If the market gains significantly over the life of the loan, you could end up with significantly fewer assets for retirement than planned. Borrowing from your retirement account 457(b) 401(k) 403(b) to borrow from your retirement account Deciding whether

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Page 1: from your retirement account LOANS - Maryland · 2016-03-24 · Facebook “f” Logo CMYK / .eps Facebook “f” Logo CMYK / .eps Your guide to the MSRP Loan Program or NOT Advantages

LOANS

Maryland Teachers and State Employees Supplemental Retirement Plans

Maryland Teachers and sTaTe eMployees suppleMenTal reTireMenT plans

11350 McCormick Rd, Executive Plaza 1, Ste 400 Hunt Valley, MD 21031

800-545-4730

Nationwide is the administrator for MSRP. Nationwide Investment Services Corporation (member, FINRA), an affiliate of Nationwide, provides educational and enrollment services on behalf of MSRP. Financial & Realty Services, LLC may provide education and marketing support services on behalf of Nationwide. Its Retirement Consultants are registered representatives of FSC Securities Corporation (FSC), member FINRA, SIPC. FSC and Financial & Realty Services, LLC are not affiliated with MSRP, Nationwide or NISC.

Nationwide and Nationwide Life Insurance Company (collectively “Nationwide”) have endorsement relationships with the National Association of Counties, and the International Association of Fire Fighters-Financial Corporation. More information about the endorsement relationships may be found online at www.nrsforu.com.

Nationwide is a service mark of Nationwide Mutual Insurance Company.

© 2016 Nationwide NRM-3604MD.10 (02/16)

MarylandDC.com

facebook.com/msrp

twitter.com/msrp

Facebook “f ” Logo CMYK / .eps Facebook “f ” Logo CMYK / .eps

Your guide to the MSRP Loan Program

or NOT

Advantages & disadvantages of borrowing from your retirement account

Advantages• No credit check—you’re essentially

“borrowing from yourself.”

• No taxes to pay as long as repayments are received on time and other conditions are satisfied.

• Competitive interest rates— generally “Prime Rate” + 1%.

• You essentially “pay interest to yourself,” rather than a conventional lender.

• Reasonable repayment terms— one to five years for general purpose loans and up to fifteen for primary residence loans.

Taking a loan from your MSRP account can be a benefit— or a potential liability. Understanding potential advantages and disadvantages of borrowing from your retirement account may help avoid misunderstanding in the future.

Disadvantages• Payments are made with after-tax dollars,

rather than pre-tax contributions.

• On defaulted loans, the entire outstanding loan amount and accrued interest is subject to income taxes and possible additional tax. Any defaulted loan will continue to be an obligation which accrues interest until the loan is either repaid or offset.

• If the market gains significantly over the life of the loan, you could end up with significantly fewer assets for retirement than planned.

Borrowing from your retirement account

457(b)

401(k)

403(b)

to borrow from your retirement account

Deciding whether

Page 2: from your retirement account LOANS - Maryland · 2016-03-24 · Facebook “f” Logo CMYK / .eps Facebook “f” Logo CMYK / .eps Your guide to the MSRP Loan Program or NOT Advantages

EligibilityYou must have a minimum combined account balance of $5,000* in the account you are taking the loan from (after and/or pre-tax accounts), complete and sign a loan application prepared for you by calling 800-545-4730, pay an application fee and acknowledge receiving applicable loan documents. (Retirees may also request loans.)

*In calculating loans, 401(a) assets are not includable. NOTE: You cannot receive a loan from a 401(a) account.

Loan amounts Loans range from $2,500 to 50% of your account value up to $50,000. (Available loan amount and distributions may be affected by prior loans, even if paid off.)

Terms and number of loans allowed Primary residence loans are structured to be repaid within fifteen (15) years from disbursement. All others are structured so to be repaid between one and five years of disbursement.

Only one loan may be granted at a time.

Current loan fees Loan fees appear as administrative charges on statements.

• Application fee: $50, nonrefundable

• Annual fee: $50, assessed on the anniversary date of the loan

• Default fee: $50, assessed on date of default

• Annual default fee: $50, assessed on anniversary date of the original loan default until the loan is repaid in full

• Insufficient Funds Fee: $25 each

Loan fees are subject to change upon 30 days’ notice. MSRP has asked Nationwide® to administer its loan program available through your retirement account.

Interest rate Generally, the rate is the prime rate + 1% at the time of the request. “Prime Rate” is defined as the Prime Rate published by The Wall Street Journal two weeks prior to the end of the calendar quarter that ends prior to the initiation of the loan.

How the loan program worksHow to apply or get more informationCall a customer service representative toll-free at 800-545-4730, or for other plan information visit us on the web at MarylandDC.com.

Payments The full amount of each payment (principal and interest) must be paid on the specified due date. Non-payment will result in:

• Nationwide will send a written request for the missed payment plus interest within 30 days. Failure to pay within 30 days after the date of the missed payment will cause the loan to default.

• A default fee will be accessed on your account on the loan’s default date.

• Loans may be repaid in full prior to the term due date without penalty if the payment is made with a lump-sum payment.

Repayment schedule Principal and interest payments must be made at least monthly.

• Nationwide will debit your bank account.

• Payroll deduction is not available.

Defaulted loans Federal law requires defaulted loan amounts to be reported to the IRS as deemed distributions. The entire outstanding loan balance and accrued interest-to-date on the default date will be includable in your income and subject to income tax and any applicable excise tax.

Please note that interest will continue to accrue on the defaulted loan balance, and your account will be charged an annual $50 loan default fee until the defaulted loan is paid in full. While repaying the defaulted loan balance is an option so that you have the ability to initiate another loan and cease being charged a one-time $50 default fee as well as the annual loan default fee, it is not a requirement of the plan. Should you choose to repay the defaulted loan balance, the repayment would be treated as after tax dollars so you would not be taxed again on that amount once you withdraw the funds at a later date and avoid loan default.

The Uniformed Service Employment & Reemployment Rights Act (USERRA) allows for suspension of loan repayments for participants who are on active duty.