New York City Police Pension Fund
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Tier 2 - Final Retirement Loans

Taxable Loan Final Withdrawal at Retirement
If a member takes a pension loan using taxable funds within five years of retirement and fully repays it by his/her retirement date, that loan will not be taxed. However, any unpaid taxable loan balance at retirement is considered a taxable plan distribution and may create or increase a shortage. If the member with an unpaid taxable loan balance at retirement is under 50 years old, he/she will incur a 10% early withdrawal penalty. To avoid taxes and the penalty, the member may roll this loan over to an IRA or other qualified retirement plan within 60 days of retirement.
A member may elect to withdraw up to 90% of his/her required amount at retirement. This is called the final withdrawal (sometimes called the “final loan”). The final withdrawal can consist of both taxable and/or non-taxable funds. The final withdrawal will also create a shortage. As with the above loan, the taxable portion of a final withdrawal must be rolled over to an IRA or other qualified retirement plan within 60 days of its issuance to avoid taxation and a possible early withdrawal penalty.

At retirement, the Police Pension Fund provides every retiree with the tax-free/taxable breakdown of their ASF contributions as well as the tax-free/taxable composition of the final withdrawal and any outstanding pension loans, as applicable.