NYSLRS loans are paid back through
payroll deductions, which are taken out of your paycheck by your employer. During
the five-year period, we’ll periodically review your remaining loan balance. If
your current payroll deduction amount won’t be enough to pay off your loan
within the required timeframe, we’ll notify your employer to increase your
payroll deduction. We do this to make sure you can repay your loan on time.
Generally, the increase of your
payroll deduction will be small. Your increase could be more significant if,
for example, you go on leave without pay and need to make up any missed
Once you pay your loan in full,
we’ll notify your employer to stop taking payroll deductions.
How You Can Adjust Payroll Deductions
You can sign in to your Retirement Online account or call our automated phone line to check your outstanding loan balance. Knowing your outstanding loan balance can help you determine how to adjust your payroll deductions if you want to pay off your loan sooner. Please visit our website for more information about repaying your NYSLRS loan.
Borrowing against your contributions is just one of the services available to eligible members of The New York State & Local Retirement System (NYSLRS). But what happens if you have an outstanding loan, go off the payroll and your automatic loan payments are discontinued before the loan is paid off?
The answer is….it depends. If you leave your job because you’re retiring, then your benefit will be permanently reduced – you can’t pay off your loan once you’re retired. However, if you leave work for any other reason, you are required to make direct payment at least quarterly and complete repayment within five years from the date the loan was issued. If you fail to meet either of these conditions, your loan will default.
What Happens If My Loan Defaults?
If your loan defaults:
We must report your outstanding balance, minus any previously taxed amount, to the IRS as a distribution to you.
You must include the loan on your federal income tax return for the year it defaults. (If it was taxable prior to default, you will not be re-taxed on that portion of the loan.)
If you’re under age 59½, you will be subject to an additional 10 percent penalty on the taxable portion of the loan. (There are no New York State or local taxes due on the distribution.)
You still owe the balance to the Retirement System and the loan continues to accrue interest and insurance charges until it’s paid in full.
We cannot issue a new loan until the defaulted loan has been repaid.
Take the Proper Precautions
If you leave public employment, contact us as soon as possible. We’ll tell you the exact amount you need to repay to avoid defaulting. When making a payment, be sure to write “loan payment” on your check and include your member registration number so we can apply it to the correct account. Mail payments to us at the following address:
New York State and Local Retirement System
Attention: Accounts Receivable
110 State Street
Albany, NY 12244
For more information about loans, you can contact us using our secure email form: www.emailNYSLRS.com. One of our representatives will respond back to you within 3 to 5 business days.