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      Loan Application

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Internal Revenue Service (IRS) Regulations
For Pension Loans

Loan balances must be repaid within five (5) years and cannot exceed $50,000 or 1/2 of your posted contributions, whichever is less.

Internal Revenue Service regulations also require members to make timely payments toward outstanding loan balances. Failure to repay the loan as scheduled may result in the unpaid loan balance being declared a deemed distribution that is taxable under the rules of Section 72(p) of the Internal Revenue Code.

  • In this event, the Division of Pensions and Benefits will report the distribution to the IRS and send you a Form 1099-R for tax filing purposes in January of the year following distribution.

  • You will be required to include the portion of the loan representing before-tax contribution as income on your federal return.

  • In addition, if you are under age 59 1/2, you will be required to pay an additional 10% tax for taking an early pension distribution.

A deemed distribution cannot be cancelled by resuming loan payments or repaying the loan in full prior to the end of the tax year in which the deemed distribution occurs. Unlike a normal pension distribution, a loan treated as a distribution cannot be rolled over to an IRA or another qualified retirement plan.

Members who take a loan and subsequently fail to remit loan payments may also be subject to additional IRS penalties.

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