Planning on taking out a NYSLRS loan? Applying online offers speed and convenience.
NYSLRS loan eligibility is based on your tier, but generally, you’ll need to be on the payroll of a participating employer, have at least one year of service and have a certain amount of contributions in your account. Retirement Online will provide the eligibility information you need as you step through the application process. (Note: retirees are not eligible for NYSLRS loans.)
Retirement Online is the fastest way to apply for a NYSLRS loan. It’s also an easy way to check your current loan balance, the amount you are eligible to borrow and more.
The Application Process
Once you’ve signed in, scroll down to ‘My Account Summary.’ Under ‘I want to…’ click the green “Apply for a Loan” button and follow the prompts.
As you work your way through the online application, you’ll see:
- How much you can borrow;
- The minimum repayment amount;
- The expected payoff date; and
- How much you can borrow without tax implications.
A service charge of $45 will be deducted from your loan check when it is issued. The current interest rate is 5 percent. The interest rate will remain fixed for the term of your loan.
NYSLRS loans are exempt from New York State and local income taxes. But the Internal Revenue Service (IRS) may consider all or part of a NYSLRS loan taxable in some cases – for instance, if you borrow above certain limits. The Retirement Online loan application will show you the maximum amount you can borrow without tax implications.
If you already have a loan and you want to take another loan, you can either take multiple loans or refinance your existing loan. Taking a new loan (the multiple-loan option) minimizes your potential tax consequences. Your minimum payment will be higher, but you will pay off your loans faster than you would by refinancing. Refinancing adds the new loan amount to your existing balance and spreads the entire balance over a new five-year term. Your payment will be lower but your tax consequences may be significantly higher.
Repaying Your NYSLRS Loan
Loan payments will be deducted from your paycheck. You can choose the minimum payroll deduction, which would pay off your loan in five years, or you can pay more to pay off your loan sooner. The payment calculator in Retirement Online will provide your expected payoff date if you enter an amount higher than the minimum.
Retiring With an Outstanding NYSLRS Loan
If you retire with an outstanding loan, your pension will be reduced. You will also need to report at least a portion of the loan balance as ordinary income (subject to federal income tax) to the IRS. If you retire before age 59½, the IRS may charge an additional 10 percent penalty. If you are nearing retirement, be sure to check your loan balance. If you are not on track to repay your loan before you retire, you can increase your loan payments, make additional lump sum payments or both.
Note: Employees’ Retirement System (ERS) members may repay their loan after retiring, but they must pay the full amount (that is, the amount that was due on their retirement date) in a single lump-sum payment. Following your full repayment, your pension benefit will be increased from that point going forward, but it will not be adjusted retroactively back to your date of retirement.
For more information about NYSLRS loans, visit our Loans page. If you need help with the Retirement Online loan application, click “Help” at the top of your account page, then click next to ‘Requesting a Loan’ and select the step-by-step guide that best fits your situation.