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HomeMy WebLinkAboutICMA R.C. Prototype Money Purchase Plan -1997 01 30 LOAN GUIDELINES NAME OF PLAN: City of Winter Springs, Florida lCMA R.C. Prototype Money Purchase Plan (109604) I. PURPOSE The purpose of these guidelines is to establish the terms and conditions under which the Employer will grant loans to participants. This is the only offIcial Loan Program Document of the above named Plan. II. ELIGIBILITY Loans are available to all active employees. Loans will not be granted to participants who have an existing loan in default. Loans are available from the following sources: [select one or both] 129 . Employer Contribution Account (vested balances only) Qg Participant Contribution Accounts (pre- and post-tax, if applicable, including Employee Mandatory, Employee Voluntary, Employer Rollover, and Portable Benefits Accounts, but excluding the Deduct- ible Employee Contribution/Qualified Voluntary Employee Contribution Account) Loans will be pro-rated among all the funds in which the participant is invested at the time the loan is made. Loans are available for the following purposes: [select one] o All purposes OCI Loans shall only be granted in the event of a participant's hardship or for the purpose of enabling a participant to meet certain specified financial situations. The Employer shall determine, based on all relevant facts and circumstances, that the amount of the loan is not in excess of the amount required to relieve the financial need. For this purpose, financial need shall include, but not be limited to: unreimbursed medical expenses of the participant or members of the participant's immediate family, establishing or substantially rehabilitating the principal residence of the participant, or paying for a college education (including graduate studies) for the participant or his/her dependents. III. FREQUENCY OF LOANS [select one] (Xl Participants may receive one loan per calendar year. Moreover, participants may have only one outstanding loan at a time. o Participants may receive one loan per calendar year. Moreover, no participant may have more than five (5) loans outstanding at one time. PP93F . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . IV. LOAN AMOUNT The minimum loan amount is $1,000. The maximum loan amount is: the lesser of: (1) $50,000, reduced by the excess (if any) of: a. The highest outstanding balance of loans during the one-year period ending on. the day before the date a loan is to be made, over b. The outstanding balance of loans on the date the loan is to be made; or (2) 1/2 of the participant's vested account balance. If a participant has any loans outstanding at the time a new loan is requested, the new loan will be limited to the maximum amount calculated above reduced by the total of the outstanding loans. V. lENGTH OF LOAN A loan must be repaid in substantially equal installments of principal and interest, at least monthly, over a period that does not exceed Eve (5) years. Loans for a principal residence must be repaid in substantially equal installments of principal and interest, at least monthly, over no more than 10 [state number of years] years (maximum 30 years). VI. LOAN REPAYMENT PROCESS Loans for active employees must be repaid through payroll deduction. Repayment will begin as soon as practi- cable on a date determined by the Employer's payroll cycle. Loans outstanding for former employees who are allowed under Section X. to maintain their loans or loans outstanding for employees on a leave of absence must be repaid on the same schedule as if payroll deductions were still being made unless they reamortize their loans and establish a new repayment schedule which provides that substantially equal payments are made at least monthly over the remaining period of the loan. All repayments must be made through the Employer. Loan payments, including loan payments from former employees, are allocated to the same investment options designated on the 401 Enrollment Form or according to the most current 401 change form which specifies contribution allocations. VII. LOAN INTEREST RATE The rate of interest for loans of five (5) years or less will be based on prime plus 0.5%. The rate of interest for loans for a principal residence will be based on the FHA/V A rate. Interest rates are determined on the last business day of the month preceding the month the loan is disbursed. The interest rate is locked in at the time a loan is approved and remains constant throughout the life of the loan. The prime interest rate is determined on the last business day of each month using the Wall Street Journal as the source. The FHA/V A interest rate is also determined on the last business day of each month using the Te1erate Information Service as the source. PP93F . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Loan interest rates for new loans may t1uctuate upward or downward monthly, depending on the movement of the prime and FHNV A interest rates. The Employer may modify the manner in which loan interest rates will be determined, but only with respect to future loans. VIII. LOAN APPLICATION PROCEDURE All loans must be requested in writing on an application approved by the Plan Administrator. The application must be signed by the participant. The Employer must review and approve the application. If the participant is married at the time of application, and spousal consent is required by the plan for the loan, the participant's spouse must consent, in writing, to the loan and the consent must be witnessed by a plan repre- sentative or notary public. Such consent must be given within the ninety (90) day period before the time the loan is made. Spousal consent, if required, must accompany the application in order for the application to be considered complete. The participant will be required to sign a promissory note evidencing the loan and a disclosure statement which includes an amortization schedule prior to receiving a loan check. Loan checks will generally be issued on the Friday following the receipt of a complete loan application. The loan check, promissory note, disclosure statement and truth-in-lending recision notice will be sent to the Employer, who will obtain the necessary signatures and deliver the check to the participant. All executed documents must be returned to the Plan Administrator within 10 calendar days from the date the check is issued. IX. SECURITY/COLLATERAL That portion of a participant's vested account balance that is equal to the amount of the loan is used as collateral for the loan. The collateral amount may not exceed 50% of the participant's vested account balance at the time the loan is taken. Only that portion of the vested account balance that corresponds to the amount of the outstanding loan balance is used as collateral. X. ACCELERATION [select one] 'IZI All loans are due and payable in full upon separation from service. o All loans are due and payable when a participant receives a distribution of all of hislher account balance after separation from service. The amount of the outstanding loan balance will be reported as a distribution in addition to the amount of cash distributed from the plan. .. o All loans are due and payable when a participant receives a distribution of part of hislher account balance after separation from service. The amount of the outstanding loan balance will reported as a distribution in addition to the amount of cash distributed from the plan. PP93F . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . XI. REAMORTIZA TION Any outstanding loan may be reamortized. Reamortization means changing the terms of a loan, such as length of repayment period, interest rate, and frequency of repayments. A loan may not be reamortized to extend the length of the loan repayment period to more than tive (5) years from the date the loan was originally made, or in the case of a loan to secure a principal residence, beyond the number of years specUled by the Employer in Section V. above. A participant must request the reamortization of a loan in writing on a reamortization application acceptable to the Plan Administrator. Spousal consent must accompany the request for reamortization when such consent is required by the plan. Upon processing the request, a new disclosure statement will be sent to the Employer for endorsement by the . participant and approval by the Employer. The executed disclosure statement must be returned to the Plan Administra- tor within 10 calendar days from the date it is signed. The new disclosure statement is considered an amendment to the original promissory note, therefore a new promissory note will not be required. A reamortization will not be considered a new loan for purposes of calculating the number of loans outstanding or the one loan per calendar limit XII. REFINANCING EXISTING LOANS If a participant has one outstanding loan, that loan may be ret1nanced. If a participant has more than one outstand- ing loan, no loans may be ret1nanced. Retinancing means concurrently repaying an existing loan and borrowing an additional amount through a new loan. In order to retinance an existing loan, a participant must request a new loan in writing on an application approved by the Plan Administrator. Spousal consent must accompany the application when such consent is required by the plan. Such request must be made at a time when the participant is eligible to obtain a loan as det1ned by the Employer in Section III. above. The amount of a new loan requested for the purpose of ret1nancing is subject to the loan limits specitied in Section IV. above. Because a retinancing is considered a new loan, only active employees may retinance an outstanding loan. XIII. REDUCTION OF LOAN If a participant dies and leaves an outstanding loan, the unpaid loan balance will be repaid from the account balance before any distributions are made to a beneticiary. XIV. LOAN DEFAULT If a required payment of principal and interest is not made within 90 days of the date such payment is due, the loan is considered in default. If a loan is in default, the loan will be foreclosed during the calendar year in which the participant separates from service. However, the IRS "deems" a default to be a distribution in the year the default occurs. Therefore, the amount of the outstanding loan at the time of the default, including accrued interest, will be reported to the IRS as a distribution in the year the default occurs even though the loan may not be fore- closed at that time. The distribution may be subject to taxes and possibly a penalty for early withdrawal. If a participant has separated from service and defaults on a loan, then the loan will be foreclosed during the calendar year in which the default occurs. The amount of the outstanding loan, including accrued interest, will be reported to the IRS as a distribution which may be subject to taxes and possibly a penalty for early withdrawal. PP93F . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . If the Employer has elected in Section X. and the promissory note so provides, a loan becomes due and payable when the participant separates from service. If the terms of the loan contain this provision, the outstanding loan amount is "deemed" in default as of the date of separation from service. The amount of the outstanding loan, including accrued interest, will be reported to the IRS as a distribution which may be subject to taxes and possibly a penalty for early withdrawal. If the Employer has so elected in Section X. and the promissory note so provides, a loan becomes due and payable when the participant takes a distribution of some or all of the balance in hislher account after separation from service. If the terms of the loans contain such a provision and the outstanding loan balance is not paid prior to th~ distribution from the account, the outstanding loan amount will be considered in default upon issuance of the distribution check. The amount of the outstanding loan, including accrued interest, will be reported to the IRS as a distribution which may be subject to taxes and possibly a penalty for early withdrawal. xv. DE MINIMIS ACCOUNTS AND OUTSTANDING LOAN BALANCE If a participant separates from service and the participant's total vested account balance, including the outstanding loan balance, is $3,500 or less, the Plan will automatically foreclose the loan. The account balance remaining after the loan has been satisfied will be disbursed in accordance with De Minimis provisions of Section 10.04 of the Plan. If this occurs, the amount of the loan, including accrued interest, will be reported to the IRS as part of the distribution, which may be subject to taxes and possibly a penalty for early withdrawal. XVI. FEES Fees may be charged for various services associated with the application for and issuance of loans. All applicable fees will be debited from the participant's account balance. A schedule of fees applicable to this Plan is available from the Plan Administrator. XVII. OTHER The Employer has the right to set other terms and conditions as it deems necessary for loans from the Plan in order to comply with any legal requirements. All terms and conditions will be administered in a uniform and non-discriminatory manner. In Witness Whereof, the Employer hereby caused these Guidelines to be executed this 20th day of June , 19-.2L. EMPLOYER BY: /~ cwN W. 111 fi~r TITLE: City Manager ATTEST:~A' ~r~~ AC~: ICI~A ,\ETIR~CORPORATION BY: Lv.\..J~\..L TITLE: :.j!!!"'" "'S<".~ ATTES.' P ! JUL 0'1 1991 PP93F