Fact Sheet #81 December 2022 Page 2
Loans
This fact sheet is a summary and not intended to provide all information.
Although every attempt at accuracy is made, it cannot be guaranteed.
ance is recertied at the current year’s interest rate.
You can view your loan certications on MBOS to
see your repayment rate and the scheduled number
of payments. The new loan must be repaid within ve
years of the original loan date. The interest rate is
determined using the Prime Rate as of December of
the previous year plus 2.5 percent. An administrative
processing fee applies to all pension loans, which is
set annually and based on the actual costs associat-
ed with administering the pension loan program. For
the current interest rate set by the State Treasurer
and administrative fee, visit our website.
MAXIMUM LOAN BALANCE
AND BORROWING LIMITS
Internal Revenue Service (IRS) regulations regard-
ing subsequent loans require that any new loan
amount — when added to the highest balance due
for all previous loans during the prior 12-month pe-
riod — cannot exceed $50,000. The $50,000 maxi-
mum is comprised of the following:
• The amount of the loan you are currently re-
questing; plus
• Your highest outstanding loan balance from the
PERS, TPAF, PFRS, SPRS, and/or JRS in the
prior 12 months; plus
• The highest outstanding loan balance from any
other governmental plans sponsored or adminis-
tered by your public sector employer.
When you submit your loan request, you will be re-
quired to indicate whether you have taken a loan in
the prior 12-month period (other than from the PERS,
TPAF, PFRS, SPRS, or JRS) from plans oered by
your public employer. It is important to maintain doc-
umentation for your records of the pension loans tak-
en from other plans oered by your employer in the
event of an audit. Any amounts received in excess of
the maximum may be declared a deemed distribution
and subject to additional tax by the Internal Revenue
Service (IRS). See the “Internal Revenue Service
(IRS) Requirements” section for more information.
See “Appendix” for detailed examples of borrowing
scenarios.
FIVE-YEAR END DATE AND
MINIMUM REPAYMENT AMOUNT
Your total outstanding loan balance must be repaid
within ve years. If you take another loan while you
still have an outstanding loan balance posted to your
account, the combined loan balance must be repaid
within the original ve-year period from the rst loan.
The minimum deduction for your loan is set by law
as no less than your pension contribution. You can
choose a payment amount larger than the minimum
deduction; however, the deduction cannot exceed
25 percent of your base salary. Some members with
an outstanding loan balance may be required to pay
more than the minimum deduction. If you take a
second loan when you already have an outstanding
loan, the two loans are combined and the ve-year
maximum repayment period that applied to your pre-
vious loan also applies to your new loan. All loans
are also subject to the maximum loan balance re-
quirements previously described. See “Appendix” for
detailed examples of borrowing scenarios.
LOAN SCHEDULE
Loans are calculated to allow the longest amount of
time to pay them o at the lowest monthly repayment
rate, unless otherwise requested. The number of
loan payments and the amount of interest is depen-
dent upon a continuous repayment schedule. If you
are not receiving your paycheck for any reason and
your loan deductions are not remitted as scheduled,
your loan balance will accrue additional interest if
you are o payroll for any amount of time. It is import-
ant that you notify the NJDPB immediately upon your
return to payroll, so your loan plus additional accrued
interest can be rescheduled and repaid by your ve-
year end date. Failure to notify the NJDPB in a timely
manner will cause additional interest to accrue and
may result in tax penalties from the IRS. See the “In-
ternal Revenue Service (IRS) Requirements” section
for more information. The NJDPB reserves the right
to audit your loan balance at any time, including after
retirement.
PAYING OFF YOUR LOAN EARLY
You may make a lump-sum payment to pay o your
full loan amount; however, partial repayment of your
loan balance is not permitted. You may request a
lump-sum payo letter using the “Letters and State-
ments” application through MBOS or by calling the
Oce of Client Services at (609) 292-7524. The pay-
o letter will be mailed to you with the amount due
and the date that your payment must be received by
the NJDPB.
Note: Due to time frames associated with certifying
loan deductions and payments, a lump-sum payo
may not be an option if your loan has less than six bi-
weekly or three monthly payments remaining on your
entire balance. The NJDPB updates your account
with pension contributions and loan repayments
(including lump-sum loan payments) on a quarterly
basis. Please note that any repaid funds will not im-
mediately post to your account, and any future loan
request is subject to the restrictions on maximum
loan balances set forth in the IRS requirements.
LOAN BALANCE AT RETIREMENT
If you retire with an outstanding loan balance you
have two options: pay o the outstanding loan bal-
ance in its entirety, or repay the loan deductions from
your retirement allowance until the balance of the
loan plus interest is repaid. The monthly loan pay-
ment will be calculated to have the loan plus interest