PENSION LOANS TAKEN AT TIME OF RETIREMENT TIER I & II (ARTICLE II & IIA) LOANS
Should you retire before your loan is fully repaid or take a pension loan at retirement, it is considered a distribution from a qualified pension plan and is treated by the IRS as such, and will result in a shortage in the member’s account. The actuarial impact of this shortage will reduce your retirement allowance for life.

At retirement, if any of the interest or untaxed contributions are outstanding, they will be subject to a federal tax. Members who are under age fifty (50) will also be subject to a 10% penalty on these funds.

• Members who take pension loans within five (5) years of retirement should note that by repaying the loan within five (5) years, that loan is treated as a non-taxable loan. Should the member retire before that loan is repaid in full, any outstanding taxable balance will be considered a distribution subject to Federal tax (and 10% penalty if member is under the age fifty {50}).
  
  
• At the time of retirement, the Police Pension Fund will provide you with a breakdown of tax-free and taxable amounts in your annuity account including any outstanding loan balances. Any taxable funds are eligible for rollover into a qualified IRA or a 401(K) to defer Federal tax and the 10% penalty, if applicable.