What if a member fails to repay a loan?
A failure to repay a loan has consequences for the benefit to which the member may be entitled to at retirement. If the member has not repaid the loan at the time of retirement, the member is treated as having received a distribution of the outstanding amount of the loan at retirement. In either case, the distribution reduces the member’s accumulated contributions available at retirement to provide an annuity based upon those contributions. As a general matter, unless a DRO contains specific language prohibiting a member from taking a loan or transferring or encumbering his/her retirement benefit, the Fund will place no restriction on the member’s right to obtain a loan. If a member was not restricted by a DRO from obtaining a loan, the alternate payee’s share of the member’s accumulated contributions in the ASF at retirement, if any, will be calculated using only the remaining balance of the ASF, unless the DRO expressly provides otherwise.
