Part 5004 - Loans

Section 5004.10  - Loan Default

(a) When required payments have not been made for three months, a loan shall be considered to be in default.

(b) In the event of default, the System shall be authorized to collect such payment due from the employer of such member through payroll deduction and such member shall forfeit all future entitlement to borrow from the System until the unpaid balance of the loan outstanding at the time of default is fully paid.

(c) In the event of default by a Tier I or II member:

(1) If the member is not employed as a teacher under Article 11 of the Education Law at the time of default, the loan shall be closed to the annuity savings account;

(2) If the member has claimed bankruptcy, the loan shall be closed to the annuity savings account;

(3) Any loan which has been declared in default and closed to the annuity savings account of the member may not be repaid as a loan.

Should such a member desire to repay his defaulted loan, he must do so by making a special arrangement with the System to make an additional contribution to his annuity savings account.

(d) In the event of default by a Tier III or IV member:

(1) The loan shall continue to accrue interest charges until death, withdrawal or retirement;

(2) The System shall have no right to bring suit in any court against any member to enforce the amount due and the System's sole remedy upon death, retirement or withdrawal shall be to offset the amount outstanding including interest from the member's account or other benefits payable to or on behalf of the member.

(Statutory authority: Education Law, §512-b; Retirement and Social Security Law, §§517-b, 613-a)