TIER I & II (ARTICLE II & IIA) LOANS
You may borrow up to 90% of your accumulated contributions while you are still a member of the Police Pension Fund provided you have completed three (3) or more years of credited uniformed City service. You repay your loan through payroll deductions at a minimum rate of 2% of gross salary.

You can have up to two (2) loans during any twelve (12) month period. The annual interest charged on unpaid balances is currently 4%.

As per NYPD Operations Order #12, issued 3/20/08 and effective immediately, all new loans with a repayment schedule of five years (130 payments) or less will be treated as separate loans for purposes of repayment, tax liability and tracking. The minimum repayment for all new loans will be subject to a minimum repayment of 2% of the member’s bi-weekly gross salary. In the case where a member takes out more than one loan, each individual loan will be subject to a minimum repayment of 2% of their bi-weekly gross. Members will be limited to a total of ten outstanding loans at any given time with no more than two loans given in any 12 month period.

Loans repaid with a term greater than five years (130 payments) will be combined together and the member will be subject to only one loan repayment.

Existing loans will not be combined with any new loans and will continue with the minimum repayment at the time the loan was originally taken.

Taxability calculations for pension loans stay the same. Outstanding principal is now calculated as the total outstanding principal of all active loans, including any loans taken from the Deferred Compensation Plan.

LOAN EXAMPLE: A member with a prior outstanding loan of $34,997 requests a new loan of $15,000 to be repaid in 5 years. This new loan (Loan #2) will have a term of 130 payments of $ 127.15 to cover interest and principal on this $15,000.

Upon the start of the repayment of the second loan this member will now have two outstanding pension loans and will be making the following two bi-weekly loan payments:

Loan #1: $ 135.98 with 326 payments remaining and an outstanding principal of $ 34,997

Loan #2: $ 127.15 with 130 payments remaining and an outstanding principal of $ 15,000

The sum of the bi-weekly loan payments is $ 263.13 and the cumulative outstanding loan principal is $49,997.

*** Note: It is recommended that members consult with a Police Pension Fund Loan Counselor as to the taxability of any particular loan. It is also recommended that members consult with their professional tax advisor on issues of income taxability.

You can repay your loan in full at any time. Additionally, you can partially repay your loan at any time (minimum repayment $500) or change your loan payments twice per year (May or November). If you die before retirement, any unpaid balance up to a maximum of $25,000 is insured as shown below:

IF YOUR LOAN HAS BEEN IN EFFECT	IT IS INSURED TO THIS AMOUNT
Less than 30 days	0%
30--59 days	25%
60--89 days	50%
90 days or longer	100%

Federal tax law applies when taxable contributions (414h pension contributions since December 1989) and any interest earned on your account are borrowed and:

• The amount of the loan that is taxable is the total amount of the amount of interest and untaxed contributions borrowed.
  
  
• If no interest or taxable contributions are borrowed, ie., funds borrowed from your account that were deposited as "50% additional deductions" or contributions made prior to the enactment of 414H, the loan will not be considered a taxable distribution and will not be subject to repayment within five (5) years.
  
  
• Checks are sent to the address listed on the application. In addition, if your loan is taxable, the Police Pension Fund will send a "1099R" to the address on the loan application unless we receive a written notification requesting a change of address. Please note that a change of address filed with Personnel Orders Section of the NYPD will not be forwarded to the Police Pension Fund and therefore will not prevent the forwarding of the 1099R to the old address, you must make the change with the Police Pension Fund directly.
  
  
• If a member changes the repayment terms on a five year loan (ie: coming in two months later and extending the number of payments to another 129/130 payments) the member will incur a tax liability.

NOTE: The Internal Revenue Code 72 (p) (2) (b) (ii) provides an exception to the five-year rule where the proceeds of the loan are used to purchase your principal residence. Members will receive a 1099 for this type of transaction. However, it is incumbent upon the member to file this 1099 with his/her tax return and have his/her tax preparer file the proper documentation concerning these funds having been used to acquire a principal residence.* This exception is not available for final loans (at retirement).

NOTE: Members are reminded that taking pension loans at 4% will result in a loss of interest (currently your annuity is receiving 8 1/4%) to your annuity account. This loss of interest may create a shortage in a members' account even if that member repaid the loan before he retires and/or continues to make pension contributions.

NYC DEFERRED COMPENSATION LOANS
The NYC Deferred Compensation Loan Program works in conjunction with the member’s Police Pension Fund account, per IRS rules. The $50,000 maximum applies to all accounts and members taking DCLP loans are required to have the Police Pension Fund certify their highest outstanding balance within the last twelve (12) months. NYC Deferred Compensation will not issue loans in excess of $50,000 total maximum. For more information see the link below for the Deferred Compensation Loan Program.

NOTE: Members are reminded that taking pension loans at 4% will result in a loss of interest (currently your annuity is receiving 8.25%) to your Annuity Savings Fund. This loss of interest may create a shortage in a member’s account even if that member repaid the loan before he/she retires and/or continues to make pension contributions. It is strongly recommended that members carefully consider other available funding sources (e.g. equity loans, municipal credit, reduced rate car loans) before taking a pension loan. A loan secured outside the Police Pension Fund at a rate less than 8.25% allows your pension funds to remain fully on deposit and continue to accrue interest, thereby preventing (or reducing) your shortage upon retirement.

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.