Tag Archives: repaying your NYSLRS loan

NYSLRS Loans Using Retirement Online

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.)

Use Retirement Online to apply for a NYSLRS loan

Getting Started

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.

­­If you don’t already have an account, go to the Sign In page and click “Sign Up” under the “Customer Sign In” button. (Need help with Retirement OnlineSee this post for handy tips.)

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 5.8 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.

If you are having trouble making payments because of a furlough or authorized leave of absence, you can find important information in our blog post, Managing Your NYSLRS Loan Payment.

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.

More Information

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. Retirement Online is generally available from 7:00 am to 9:30 pm on Monday, Wednesday, Thursday and Friday; from 7:00 am to 6:00 pm on Tuesday; and from 6:00 am to 11:00 pm on Saturday and Sunday.

Payroll Deductions and Your NYSLRS Loan

If you take a loan against your NYSLRS contributions, you must repay the loan in five years. This timeframe is required by the Internal Revenue Service. If the loan is not repaid within five years, it defaults.

loan payroll deductions

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 payments.

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.