Read 3510-LoanFact text version

State of California Savings Plus Program

Borrowing from Your 401(k)/457 Plan Accounts LOAN FACT SHEET

he Department of Personnel Administration's Savings Plus Program (Savings Plus) allows you to take a loan from your account(s). When you take a loan, you are borrowing money from your account(s) and you must repay the loan amount plus interest back to your account(s) within the specified period of time. Before taking a loan, you may want to carefully examine all your options or consult with a tax advisor. You may model and initiate a general purpose loan and model a residential loan by calling the Voice Response System (VRS) at (866) 566-4777 or by viewing the Savings Plus Web site at If you have a Schwab Personal Choice Retirement Account (PCRA), the self-directed brokerage account offered within Savings Plus, the amount in your PCRA will be considered when calculating your available loan amount. It may be necessary for you to transfer funds from your PCRA to your core account before your loan check can be issued. The loan amount will be taken pro rata from all core funds.


Loan Information

Types of Loans Permitted Maximum Loan Period Maximum Number of Loans

General Purpose and Primary Residence General Purpose: 5 years Primary Residence: 15 years Two outstanding loans are allowed per plan, as long as one is a General Purpose loan and the other is a Primary Residence loan. $10,000 $5,000 The maximum loan amount is the lesser of (i) 50% of your account balance minus your outstanding loan balances from all State-sponsored plans on the date of distribution; or (ii) $50,000 minus your highest outstanding loan balances from all State-sponsored plans within the last 12 months. If your loan(s) request exceeds the limit, the excess loan amount will be considered a deemed distribution and be reported as taxable income.

State of California

Minimum Account Balance Minimum Loan Amount Maximum Loan Amount


Interest Rate

The interest rate is calculated at the prime rate plus 1%. The prime rate that is used to determine the interest rate is published in the Wall Street Journal on the second business day of the month. The rate will apply to loans initiated as of the first business day of the month. On the third business day of the month, the interest rate is updated on the VRS and on the Internet. General Purpose: At the time your loan is modeled on the VRS or on the Internet, the interest rate is fixed at the current monthly rate and will not change for the duration of the loan. Primary Residence: Upon receipt of your completed Primary Residence Loan Application and supporting documentation, a Primary Residence Loan Agreement and Truth in Lending Disclosure Form stating the current interest rate is sent to you. When you return the Primary Residence Loan Agreement within 15 business days of the date of the correspondence, the rate is "locked in" and will not change for the duration of the loan.

Loan Initiation Fee

A one-time nonrefundable fee of $50.00 will be deducted from each loan amount to cover the cost of processing and handling your transaction.

Loan Eligibility Loan Repayment

You qualify for a loan if you are currently employed by the State of California. You do not qualify if you are retired, separated from employment, or obtained your account as a beneficiary or through a Domestic Relations Order. Automatic Payroll Deductions Loan repayments are automatically deducted from your paycheck with after-tax dollars and invested according to your current investment allocation. If no allocation is on file, the loan repayments will be invested in the Savings Pool or other fund selected by Savings Plus. Loan repayments commence with the second pay period after loan initiation. For example, if your loan is issued in December, your repayments will start with the February pay period (for which the check is issued in early March). If you are paid more than once a month, the deduction will be taken from the final paycheck of the month. You may pay off your loan, in full, without a prepayment penalty. Partial payments are not permitted. To obtain payoff information, you may either view the Web site at or call the VRS, toll-free, at (866) 566-4777 and make the following menu selections: press 1 (account information) and again press 1 (account balance); select 1, 2, or 9 (i.e., 457, 401[k], or combined) and then press 4 for loan information, including the payoff amount. 2

Loan Payoff

The loan payoff amount stated is valid as long as the recordkeeper processes your payoff transaction by 9:00 a.m. Pacific time (PT) on the last business day of the month. Please allow sufficient mailing time for your payoff to be received by the record keeper. Direct Payments You may make loan repayments directly if you are going to pay off your loan in full or if you are on an approved leave of absence. Obtain a certified bank check made payable to Bank One, Trustee FBO (for the benefit of), and include your name, Social Security number, and plan type(s). The check must be mailed to Nationwide Retirement Solutions, P.O. Box 182797, Columbus, OH 43218-2797. Special rules apply if you go on military leave. Contact Savings Plus for instructions.

Military Leave

Transferring Loans to or from Other Plans Deemed Distribution of Loan Balances

You will not be allowed to transfer your Savings Plus loan to another plan or transfer a loan from another plan to Savings Plus.

If a payment has not been received within 90 days, the entire outstanding loan balance, including interest, will be considered a taxable deemed distribution. A 1099-R will be issued by January 31 of the following year. You will not be allowed to take another loan from the same plan until the following tax year.

Contact Information

Voice Response System: (866) 566-4777, 24 hours a day, 7 days a week Customer Service: (866) 566-4777, 8:30 a.m.­ 4:00 p.m. (PT), Monday­Friday To speak with a customer service representative, press *0. Office: 8:00 a.m.­5:00 p.m. (PT), Monday­Friday TTY: (800) 848-0833 Fax: (916) 327-1885 Web site:


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