TDA Loans
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One of the many benefits provided by TRS is your ability to borrow from your Tax-Deferred Annuity (TDA)
Program funds. This brochure highlights the important features of this benefit.
ELIGIBILITY
You must meet the following criteria to be eligible for a
TDA loan:
• You have participated in the TDA Program for
at least one year;
• You are an in-service member or a member on a
leave of absence; or you have TDA Deferral status;
and
• You are not currently in default on a TDA loan.
You may have up to five outstanding TDA loans at
once. According to Internal Revenue Service (IRS)
regulations, outstanding loan balances may not be
combined with new loans. Each loan will be treated
independently (i.e., separate loan balances, repayment
terms, interest charges, and insurance premiums).
Please note that your request for a loan may be
delayed or canceled if TRS does not have your
date-of-birth documentation on file.
LOAN AMOUNTS
TDA loans must be taken in multiples of $10. Generally,
the minimum TDA loan amount that you may borrow is
$1,000. However, you may borrow a minimum of $250
if you have an existing TDA loan; your total outstanding
TDA loan balance must be at least $1,000.
• In general, the maximum new TDA loan amount you
may request is limited to the least of the amounts
described in restrictions A, B, and C below.
• If you take a loan at annuitization, the maximum is the
amount described in restriction B below.
A. $50,000, less your highest combined loan balance
during the previous 12-month period from the
TDA, Qualified Pension Plan (QPP), and New
York City Deferred Compensation Plan (DCP)
loan programs.
B. 75% of your TDA account balance, less any
outstanding TDA loan balance.
C. The greater of (i) 50% of the combined value
of all your TRS accounts (TDA and QPP), less
any outstanding QPP and TDA loan balances, or
(ii) $10,000, less any outstanding TDA and QPP
loan balances.
TRS will also limit your maximum loan amount so that
the total per-installment payment amount on all TRS
loans does not exceed your net pay.
The value of your accounts is based on your most
recent account balances and the most recent unit values
of the variable-return Passport Funds (if applicable)
available to TRS when your loan is calculated.
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There may be a two-month lag in the updating of
account balances. For example, a loan issued in March
may be based on the account balances for January.
Please be advised that any loan balance you may have
from a New York City DCP 401(k) or 457 account may
affect the loan amounts you may borrow from your
TDA account; if you have a DCP loan, your available
TDA loan amounts may differ from the estimates
provided by TRS before you apply. Also be advised that
adverse tax consequences will result if the combined
balance of your DCP and TRS loans exceeds $50,000,
which is the maximum loan amount allowable under all
public employer-sponsored programs. Please note, since
TRS must first verify your DCP loan status and balance
before determining the amount you may borrow from
your TDA account, the processing of your loan
application may be delayed.
To find out the amount you are eligible to borrow or
any loan balances, please log in to the secure section
of our website.
LOAN APPLICATIONS
If you are in active service, are on a leave of absence,
or have TDA Deferral status, you may apply for a
TDA loan on our website, provided you have registered
for secure access. Alternatively, you may file a paper
“TDA Loan Application” (code LO15). If you file for a
loan at annuitization, you must file a paper “TDA Loan
Application” or e-form equivalent.
TRS issues loans each Wednesday; the funds are
available the Friday of the same week. Loans are issued
in one of two ways:
• Electronic Fund Transfer (EFT): You may be eligible
to receive your loan via EFT if you are paid on
the City of New York payroll and receive your
paychecks through direct deposit, or if you receive
your monthly advance payments or retirement
allowance via EFT. In either case, you may elect
that your loan be forwarded via EFT to the account
where the above payments are deposited. (Note:
City University of New York (CUNY) members
paid on the New York State payroll, and Charter
School members, cannot receive loans via EFT.)
• Check: If you receive your loan by check, TRS
is not responsible for any delays or loss through
mailing. In the event of a delay or the loss of a
check, interest charges on your loan will continue
to accrue and your repayment schedule will remain
unchanged.
Since TRS issues loans on a weekly basis, TRS must
generally receive paper loan applications by the close
of business on Wednesday of the preceding week.
(If a holiday occurs during the week, TRS must receive
your paper loan application by the first business day of
the week.) Online loan applications must be received
by 11:59 p.m. on the Sunday preceding the week they
are issued.
If you apply for a TDA loan at annuitization, TRS must
receive your application no later than one business day
before your effective annuitization date. In this case,
your loan check will be issued after your effective
annuitization date (generally the third Wednesday after
your annuitization) to meet IRS requirements. You may
apply for a TDA loan after retirement only if you elected
TDA Deferral status when you filed for retirement under
the QPP. Your TDA loan amount will be debited from
your TDA account.
On the online or paper application, you may designate
how your account should be debited to provide funds
for your TDA loan. You may elect to have your account
debited in any combination of your Passport Funds,
provided you have sufficient funds in each investment
program you designate. If your election is not valid due
to insufficient funds in an investment program, or if you
do not designate how your account should be debited,
your TDA loan amount (including the service charge) will
be debited from your Passport Funds proportionately.
Generally, if you would like to change the loan amount
or repayment terms you elected on your application, you
must submit a notarized request indicating any changes
no later than the next business day after TRS receives
your loan application. However, for a loan taken at
annuitization, you have until the close of the business
day immediately preceding your effective retirement date
to submit this notarized request.
If you would like to cancel your TDA loan application,
TRS must receive a notarized “Request for Withdrawal
of Form/Application/Online Filing” (code MI5) or
e-form equivalent by the following deadlines:
• If you filed a paper loan application, TRS must
receive your cancellation request no later than the
close of the next business day after TRS receives
your loan application.
• If you filed an online TDA loan application
Monday-Thursday, TRS must receive your
cancellation request no later than the close of
the next business day.
• If you filed an online TDA loan application
Friday-Sunday, TRS must receive your cancellation
request by 9:30 a.m. on the first business day
following the weekend.
If your cancellation request is not received by the
appropriate deadline, TRS will process your loan
application.
Please note that your loan may not be returned after
it has been issued.
INTEREST
You will be charged monthly interest on your outstanding
loan balance. The interest rate on your TDA loan is
equal to the annual rate of return that you will receive on
TDA investments in the Fixed Return Fund. Therefore,
for members who are serving in (or retired/resigned
from) titles represented by the United Federation of
Teachers (UFT), the interest rate on TDA loans will be
7%; for other members, the interest rate will be 8.25%.
The interest rate in effect when the loan is issued will be
applied for the entire term of the loan. All interest you
pay will be credited to your TDA account.
SERVICE CHARGE
A non-refundable service charge will be added to each
TDA loan you take, to cover the administrative costs of
issuing a loan. At the time this brochure was published,
the service charge was $30. You may incur an additional
service charge for any requested action that necessitates
a recalculation of your repayment amount.
INSURANCE
Your new TDA loan will be fully insured against your
death 30 days after your loan is issued. Prior to that
date, there will be no insurance coverage.
Insurance premiums of 0.3% will be included in your
regular loan payments, as long as you maintain an
outstanding balance and your loan is not in default.
If you default on a loan, any unpaid insurance
fees will be deducted from your TDA account.
(See “Defaults” section.)
REPAYMENT
In-Service Members and Members with TDA
Deferral Status
Other than the amount representing insurance charges,
your TDA loan payments will be credited to your TDA
account according to the investment elections in effect at
the time your payments are made. If you are a member
with TDA Deferral status, you may indicate how loan
payments should be credited when applying for a loan;
your election on your loan application will also apply
to payments for any other TDA loans. Please note that
in-service members or members with TDA Deferral
status may change how their TDA loan payments are
credited in the future, either on our website or by filing
a “TDA Investment Election Change Form.”
With the exception of a loan taken at annuitization, your
TDA loan must be repaid within five years (60 months)
of the date the loan was issued. If you are an in-service
member, loans are normally repaid through payroll
deductions of at least 2% of your contractual salary
(If your payroll deductions do not commence as
indicated on your loan statement, or if they are
unexpectedly interrupted, you must notify TRS
immediately.)
Please note that you will be responsible for any interest
and insurance charges that accrue during the period
when payroll deductions were expected but not received
by TRS. (If you are employed by the UFT or the
Council of School Supervisors & Administrators (CSA),
your union will deduct the appropriate amounts from
your paychecks and provide monthly loan payments
directly to TRS on your behalf.)
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If you are a retiree with TDA Deferral status, you have
a choice of how you want to repay any TDA loans:
automatic deductions from your monthly retirement
allowance or monthly direct payments to TRS. To
change your loan repayment method, you may file a
“Request to Change TDA Loan Repayment Method”
(code LO105) or online equivalent.
To reduce your loan balance, you may make a partial
payment in addition to your regularly scheduled
payments. Partial payments would not stop payroll
deductions (if applicable) and would not change the
amount of your regularly scheduled payments. You can
make partial payments online in the secure section of
our website.
If you want to change the terms of your loan
(e.g., amount or duration of payments), you must submit
a written request to TRS. A service charge would be
applied to the reamortization of your loan.
If you want to repay your total outstanding loan balance
in a lump sum, you may file a “TDA Loan Repayment
Request Form” (code LO11t) or online equivalent.
Upon receipt of the form, TRS will calculate the total
amount required to repay your outstanding loan balance
and send you written notification of the repayment
amount and payment instructions.
In certain cases, if you are an in-service member and
make a lump-sum payment in June or July (after summer
paychecks with loan payment deductions have been
issued), you will be refunded for those summer payments
later. You may avoid loan payment deductions for the
summer months by filing a “TDA Loan Repayment
Request Form” by the last business day in February.
Leave of Absence
If you take a leave of absence, you automatically qualify
for a 12-month grace period when loan payments need
not be made; however, interest and insurance charges
will continue to accrue on the unpaid balance. If you
have outstanding loans when your leave begins, the grace
period will commence upon the receipt of payroll
records indicating your change in status. If TRS issues
a loan to you during your leave of absence, the grace
period will begin upon issuance of the loan, unless you
elect on your “TDA Loan Application” to begin making
regular payments instead.
If you take advantage of the 12-month grace period,
your loan payment amount will include the interest and
insurance charges that will accrue during this time. In
addition, your payments will be recalculated and you
must recommence scheduled loan payments when your
grace period ends or you return to active service
(whichever is sooner).
However, you may elect to initiate immediate repayment
at any time during the grace period. This option allows
you to avoid paying the additional interest and insurance
charges that accrues from the time you make the
repayment to the end of the grace period.
If your leave of absence exceeds the 12-month grace
period, you must make monthly TDA loan payments
after the grace period in order to avoid defaulting on
your loans. TRS must receive these payments by the
15
th
of the month. Payments may be submitted online
through the secure section of our website. Make your
check payable to the “Teachers’ Retirement System of
the City of New York.” Please include the payment
voucher attached to your loan statement with your
loan payment.
Note: If you transfer your TRS membership to an
eligible New York City or New York State public
retirement system during your leave of absence, you
will be given a 30-day period in which to fully repay any
outstanding TDA loan balance to TRS with a lump-sum
payment. If you do not fully repay your total
outstanding loan balance within 30 days of your
notification letter, the total balance will be transferred
to your new retirement system—if the system offers a
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Section 403(b) Plan with a loan provision. If your new
retirement system does not offer a Section 403(b) Plan
with a loan provision, your loan balance cannot be
transferred. In this case, your total outstanding loan
balance will be considered a distribution; this
information will be provided to the IRS. (To be eligible
to transfer your TRS membership while on a leave of
absence, your leave must be unpaid.)
For CUNY Employees Paid on the New York
State Payroll
TRS will receive payment for only one outstanding
TDA loan through automatic payroll deductions.
For any additional TDA loan balance, CUNY members
must make monthly payments directly to TRS.
Payments are due to TRS no later than the 15
th
of the
month. TRS will provide monthly loan statements
with payment instructions. In general, direct monthly
payments will be required for the duration of the loan.
LEAVING ACTIVE SERVICE
Retirement
Unless you elect TDA Deferral status, any outstanding
TDA loan balance you have on your effective retirement
date will not be repaid to TRS and will be considered a
distribution; this information will be provided to the
IRS. If you elect TDA Deferral status at retirement, you
may maintain an outstanding loan balance and avoid a
distribution; monthly direct payments to TRS will then
be required.
Any new TDA loan taken at annuitization will not
be repaid to TRS. Instead it will be considered a
distribution; this information will be provided to the
IRS. You will have the following three choices regarding
the disbursement of a TDA loan taken at annuitization:
a) Receive the entire loan amount as a Direct
Cash Payment;
b) Have TRS directly roll over the entire loan
amount (minimum $200) to one or more eligible
Individual Retirement Arrangements (IRAs) or
other successor programs; or
c) Receive a portion of the loan amount as a
Direct Cash Payment and have TRS directly roll
over the balance. To roll over all or part of your
TDA loan, you must file a “TDA Loan Direct
Rollover Election Form” (code LO58) or e-form
equivalent. (If you elect to have TRS directly roll
over your TDA loan, you may not change the
rollover institution after your annuitization date.)
Resignation/Termination/Membership Transfer
If you have an outstanding TDA loan balance when
you resign or are terminated, you will be given a 30-day
period in which to fully repay the balance with a
lump-sum payment. If you transfer your TRS
membership to an eligible New York City or New York
State public retirement system that offers a Section
403(b) Plan with a loan provision, and do not fully repay
your total outstanding TDA loan balance within this
30-day period, the total outstanding TDA loan balance
will be transferred to your new retirement system.
If your total outstanding balance is not repaid within the
30-day period or transferred to a new retirement system:
• If you are vested, you may elect TDA Deferral status
by filing a “TDA Deferral Status Election Form
(For Vested Members)” (code TD31) with TRS
within the 30-day period. If you elect TDA
Deferral status, you will have the option to repay
your outstanding TDA loan balance through
monthly payments, provided that your loan has not
been outstanding for five years or longer. If you
do not elect TDA Deferral status within 30 days of
your notification letter, your outstanding TDA loans
would be closed. Your total outstanding TDA loan
balance will be considered a distribution; this
information will be provided to the IRS.
• If you are not vested, your TDA loans will be closed.
Your total outstanding TDA loan balance will be
considered a distribution; this information will be
provided to the IRS.
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DEFAULTS
With the exception of a TDA loan taken at
annuitization, your TDA loan will be in danger
of default if you have an outstanding loan balance
five years (60 months) after the loan’s issuance date,
or if your total past due amount is equal to or greater
than the equivalent of three regular monthly payments.
If either of the above occurs, TRS will request that you
submit full repayment of the total outstanding balance
(including interest and insurance charges). If TRS does
not receive full repayment by the date requested, you
will default on your TDA loans. Your insurance will be
terminated, and any outstanding insurance charges will
be deducted from your TDA account balance.
Any defaulted TDA loan balance will be deemed a
distribution; this information will be provided to
the IRS.
If you have TDA funds available for withdrawal,
your TDA loans will be closed; if a portion of those
funds are TDA contributions and earnings you had
accumulated as of December 31, 1988, those funds will
be reduced. If you do not have TDA funds available for
withdrawal, your remaining TDA defaulted loan balance
will continue to accrue interest until it is either repaid to
TRS or TDA funds become available to close the loans.
You will not be eligible for future TDA loans unless you
repay any remaining TDA defaulted loan balance.
TAX CONSEQUENCES OF DISTRIBUTIONS
Generally, loans are not taxable. Please note the
following tax information on loans that are considered
distributions:
• The total taxable portion of the distribution
is federally taxable and may be subject to state
and local taxes; TRS suggests that you consult a
tax advisor.
• You may also incur an IRS-imposed 10% penalty
on any taxable portion of the distribution if your
service is terminated prior to the year in which you
reach age 55, or if the distribution occurs before
you reach age 59½.
Except for defaulted loans, all or part of the taxable
amount of a TDA loan balance that is considered a
distribution may be rolled over to one or more eligible
IRAs or other successor programs within 60 days of
notification by TRS. Any amount that is rolled over
will not be taxable until it is distributed to you. If you
would like to roll over any portion of your eligible
amount, you must provide the funds to do so.
Defaulted loans (which are classified as “deemed
distributions”) are not eligible for rollover.
Loans at Retirement
Unless you elect TDA Deferral status at retirement,
any outstanding TDA loan balance at retirement that
you do not repay within 30 days of the date of TRS’
notification letter will be considered a distribution.
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Loans at Annuitization
Please note the following tax information on TDA loans
at annuitization:
• If you have an existing outstanding TDA loan
balance at annuitization, it will be considered
a distribution.
• New TDA loans taken at annuitization are
considered distributions, and will not be repaid
to TRS.
• IRS regulations require TRS to withhold 20% of
the taxable amount of a loan taken at annuitization
that you do not directly roll over. TRS will send the
amount withheld to the IRS as credit toward your
federal income taxes for the year of distribution.
• If you have an outstanding TDA loan balance at
annuitization and you take a new TDA loan, TRS is
required to withhold an amount equaling 20% of
the taxable portion of any existing loan balance and
of any new loan amount that you do not directly
roll over.
• If you receive a new loan at annuitization as a
Direct Cash Payment, withholding from any
outstanding loan balance must be taken, even if
all or part of the new loan is tax-free. If the total
withholding amount exceeds the amount of your
new loan, TRS will issue you a check in the
minimum amount of $10. Any remaining
withholding deficit will be applied against a TDA
withdrawal you receive in the same tax year; this
withholding will be in addition to any withholding
that will ordinarily be applied to a TDA withdrawal
that you receive directly.
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Code 4.2
6/21
Teachers’ Retirement System of the City of New York
55 Water Street, New York, NY 10041
www.trsnyc.org • 1 (888) 8-NYC-TRS •
For your convenience, TRS forms and publications are available on our website.
This publication should not be solely relied upon, as it is based on currently available information that is subject to change.
In all cases, the specific provisions of the governing laws, rules, and regulations prevail.
