Backup Documents 01/25/2011 Item #16E1
ORIGINAL DOCUMENTS CHECKLIST & ROUTING SLIp16 E 1
TO ACCOMPANY ALL ORIGINAL DOCUMENTS SENT TO
THE BOARD OF COUNTY COMMISSIONERS OFFICE FOR SIGNATURE
Print on pink paper. Attach to original document. Original documents should be hand delivered to the Board Office. The completed routing slip and original
documents are to be forwarded to the Board Office only after the Board has taken action on the item.)
ROUTING SLIP
Complete routing lines #1 through #4 as appropriate for additional signatures, dates, and/or information needed. If the document is already complete with the
exc tion ofthe Chairman's si nature, draw a line throu h routin lines #1 throu h #4, co lete the checklist, and forward to Sue Filson line #5 .
Route to Addressee(s) Office Initials Date
(List in routin order)
1. Colleen Greene, Assistant County
Attorney
2.
(The primary contact is the holder of the original document pending BCC approval. Normally the primary contact is the person who created/prepared the executive
summary. Primary contact information is needed in the event one of the addressees above, including Sue Filson, need to contact staff for additional or missing
information. All original documents needing the BCC Chairman's signature are to be delivered to the BCC office only after the BCC has acted to approve the
item. )
Name of Primary Staff Ofelia Tallon
Contact
Agenda Date Item was January 25, 2011
A roved b the BCC
Type of Document
Attached
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252-8715
16 E 1
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Yes
(Initial)
N/A (Not
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5. Ian Mitchell
Executive Manager to the BCC
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I: Forms/ County Forms/ BCC Forms/ Original Documents Routing Slip WWS Original 9.03.04, Revised 1,26.05, Revised 2.24.05
6. Minutes and Records
Clerk of Court's Office
PRIMARY CONTACT INFORMATION
Phone Number
Agenda Item Number
Executive Summary, Resolution and
Exhibits ! -l
ee
Number of Original
Documents Attached
1.
INSTRUCTIONS & CHECKLIST
Initial the Yes column or mark "N/ A" in the Not Applicable column, whichever is
a ro riate.
Original document has been signed/initialed for legal sufficiency. (All documents to be
signed by the Chairman, with the exception of most letters, must be reviewed and signed
by the Office of the County Attorney. This includes signature pages from ordinances,
resolutions, etc. signed by the County Attorney's Office and signature pages from
contracts, agreements, etc. that have been fully executed by all parties except the BCC
Chairman and Clerk to the Board and ossibl State Officials.)
All handwritten strike-through and revisions have been initialed by the County Attorney's
Office and all other arties exce t the BCC Chairman and the Clerk to the Board
The Chairman's signature line date has been entered as the date ofBCC approval of the
document or the final ne otiated contract date whichever is a licable.
"Sign here" tabs are placed on the appropriate pages indicating where the Chairman's
signature and initials are re uired.
In most cases (some contracts are an exception), the original document and this routing slip
should be provided to Ian Mitchell in the BCC office within 24 hours of BCC approval.
Some documents are time sensitive and require forwarding to Tallahassee within a certain
time frame or the BCC's actions are nullified. Be aware of 'our deadlines!
The document was approved by the BCC on 01125/11 and all changes made during
the meeting have been incorporated in the attached document. The County Attorney's
Office has reviewed the chan es, if a licable.
2.
3.
4.
5.
6.
16El
MEMORANDUM
Date:
January 31, 2011
To:
Ofelia Tallon, Applications Analyst
Human Resources Department
From:
Ann Jennejohn, Deputy Clerk
Minutes & Records Department
Re:
Resolution 2011-14: Approving the addition of a "loan"
option to eligible employees participating in deferred compensation
plans with ICMA-RC & Nationwide Retirement Solutions, Inc.,
Attached for your records is a copy of the resolution referenced above,
(Item #16E1) adopted by the Board of County Commissioners January 25,2011.
If you have any questions, please call me at 252-8406.
Thank you.
Attachment
16El
EXECUTIVE SUMMARY
Recommendation to approve adding the loan option to the 457 Plan Agreements
with ICMA-RC and Nationwide Retirement Solutions, Inc., and authorize the
Chairman to execute the attached implementing Resolution and other required
agreement documents.
OBJECTIVE: To gain approval from the Board of County Commissioners to add the
loan option to the agreements with ICMA-RC and Nationwide. This will provide the
ability for active County employees to borrow, with limitations, from their individual
deferred compensation plan account(s).
CONSIDERATIONS: The County currently provides employees the opportunity to save
for their retirement through deferred compensation plans offered by ICMA-RC and
Nationwide Retirement Solutions, Inc (NRS). These plans are commonly known as a
"457 Plan" to reflect the section of the IRS code that provides for the offering of such a
plan. Section 457 provides that eligible governmental 457(b) plans may permit loans to
Participants. This option must be approved by the Board of County Commissioners to
implement the loan programs.
Based on the current economic environment, Human Resources, the Plan
Administrator, proposes the approval of the option of providing the employees the ability
to borrow from their 457 plan accounts, with stipulations and limitations that are
provided in the loan agreement. Both ICMA and Nationwide will administer and approve
the loans. This will provide an additional resource for employees who are facing
financial hardships and will be a means to attract, retain and motivate employees.
Program highlights include:
· Allows eligible employees to borrow from their 457 plan funds.
· Loans will be administered by Nationwide and ICMA.
· Maximum loan term is five years, Participants will be able to borrow for any
cause; one outstanding loan at a time, the maximum term over which a loan may
be repaid is five (5) years.
· The minimum loan amount is $1,000, with a maximum of 50% of the account
balance(s) or $50,000, whichever is less.
· Loan repayments must be made by direct withdrawal (ACH) from employee's
bank account. Payroll deduction is not available.
· Terminating employees may continue to make monthly payments through ACH,
unless they withdraw their entire balance.
· Processing fees, administrative fees, delinquents fees, or taxable events may be
incurred.
· The current interest rate is Prime + 1 % for NRS and Prime + .5% for ICMA.
FISCAL IMPACT: This action will have no fiscal impact to the County.
16E 1
LEGAL CONSIDERATIONS: This item has been reviewed by the County Attorney's
Office requires simple majority vote and is legally sufficient for Board action. - CMG
GROWTH MANAGEMENT IMPACT: There is no growth management impact
associated with this Executive Summary.
RECOMMENDATION: That the Board approves the loan option in the County
agreements with ICMA-RC and Nationwide Retirement Solutions, Inc. and authorizes
the Chairman to execute the attached Resolution and other required agreement
documents.
Prepared By: Ofelia Tallon, Interim Manager - Compensation, Department of Human
Resources
Attachments:
Resolution
Exhibit 1, NRS Participant Loan Administrative Procedure.
Exhibit 2, NRS Deferred Compensation Plan for Public Employees Loans
to Participants Amendment to Plan Document
Exhibit 3, ICMA 457 Plan Loan Program Implementation Packet for
Employers (includes Loan Guidelines Agreement for a Retirement Plan
and Loan Administration Agreement for Section 457 Deferred
Compensation Plans)
16E1
RESOLUTION NO, 2011-14
A RESOLUTION OF THE BOARD OF COUNTY COMMISSIONERS OF COLLIER
COUNTY FLORIDA APPROVING THE ADDITION OF THE LOAN OPTION FOR
EMPLOYEES TO THE 457 PLAN AGREEMENTS WITH ICMA-RC AND NATIONWIDE
RETIREMENT SOLUTIONS, INC.
WHEREAS, Collier County Government desires to be an employer of excellence; and
WHEREAS, the new loan option will provide Collier County an additional resource to attract,
retain and motivate employees; and
WHEREAS, the Human Resources Department recommends adding the loan option to the 457
Plan Agreements with ICMA.RC and Nationwide Retirement Solutions, Inc" for the benefit of
all employees under the Board of Collier County Government; and
WHEREAS, the loan option will provide the Collier County employees an additional resource in
order to address possible economic hardship.
NOW, THEREFORE BE IT RESOLVED BY THE BOARD OF COUNTY
COMMISSIONERS OF COLLIER COUNTY, FLORIDA that:
1, The Board of County Commissioners approves the Human Resources Department
recommendation to add a loan option to Collier County employees' 457 Plan Agreements with
ICMA-RC and Nationwide,
2, The Board of County Commissioners hereby authorizes the Chairman to execute any 457
Plan documents necessary to include the loan option for employees subject to review and
approval for legal sufliciency by the County Attorney Office,
A TIEST:
DWIGHT E, BROCK, CLERK
BOARD OF COUNTY COMMISSIONERS OF
COLLIER COUNTY, FLORIDA
~'~W_~' ~ .'
By:
.. , C AIRMAN
"'(, ,\~\'1' .' ~J
, ""),,t,;,..-..:: .' t~lI >'
'~pproved ~.to' form and legal
(;i1fficl~rt&Y:
~~-m~Q'
~ olleen M. Greene '.
Assistant County Attorney
Item '#
j(pEt
16El
NATIONAL ASSOCIATION OF COUNTIES
DEFERRED COMPENSATION PROGRAM
THE DEFERRED COMPENSATION PLAN FOR PUBLIC EMPLOYEES
LOANS TO PARTICIPANTS AMENDMENT TO PLAN DOCUMENT
WHEREAS, PLAN SPONSOR executed the above referenced Plan Document, as
amended: and
WHEREAS, effective ~4.r~()// , PLAN SPONSOR now desires to further amend
the plan document.
The following Section 8.06 is hereby added:
8.06 Loans to PARTICIPANTS
(a) PLAN SPONSOR has elected to make loans available to PARTICIPANTS
and has delegated certain administrative duties regarding loans from the
PLAN to the ADMINISTRATOR.
(b) Any loan by the PLAN to a PARTICIPANT under this Section shall be
subject to the loan administrative procedures established by the
ADMINISTRATOR as well as the following requirements:
(i) Loan Eligibility. Any PARTICIPANT may apply for loan under the
PLAN. A PARTICIPANT who has defaulted on a previous loan from
the PLAN shall not be eligible for another loan from the PLAN until all
defaulted loans are repaid in full, including accrued interest and fees.
(ii) Loan Application and Loan Agreement. A PARTICIPANT must
complete and return to ADMINISTRATOR a loan application. A non-
refundable application fee established by ADMINISTRATOR will be
deducted from the PARTICIPANT'S ACCOUNT(s) at the time ofloan
origination. Before a loan is issued, the PARTICIPANT must enter into
a legally enforceable loan agreement as provided for by the
ADMINISTATOR.
(ill) Loan Repayment. The PARTICIPANT receiving a loan shall be required
to furnish to ADMINISTRATOR any information and authorization
necessary to effectuate repayment of the loan prior to the
commencement of a loan. In the event that a payment cannot be
processed because of lack of sufficient funds, the ADMINISTRATOR
shall assess an insufficient funds charge, which will be deducted from
the PARTICIPANT'S ACCOUNT(s).
1
DC-3980-1102
16EI
(iv) Loan Term and Interest Rate, The maximum term over which a loan
may be repaid is five (5) years (fifteen (15) years if the PLAN
SPONSOR permits loans for the purchase of a P ARTICIP ANT'S
principal residence). Each loan shall be amortized in substantially equal
payments consisting of principal and interest during the term of the loan,
except that the amount of the final payment may be higher or lower. The
ADMINISTRATOR shall establish the interest rate for any loan.
(v) Loan Frequency. Each Participant may have only one (1) PLAN loan
outstanding at any given time. A PLAN loan which is in default, even if
the defaulted loan was treated as a "deemed distribution" under federal
regulations, shall be treated as an outstanding loan until such
PAR TICIP ANT'S account balance is offset by the amount of principal
and accrued interest under the loan. A PARTICIPANT will be granted a
loan no more frequently than two (2) times in any twelve (12) month
period.
(vi) Default. The P ARTICIP ANT must pay the full amount of each loan
payment (principal and interest) on the date that it is due. Failure to
make such a payment by the due date, or within any cure period
established by the ADMINISTRATOR, shall cause the PARTICIPANT
to be in default for the entire amount of the loan, including any accrued
interest. A loan will also be in default if the PARTICIPANT either
refuses to execute, revoke, or rescind any agreement necessary to
comply with the provisions of this Section or the loan administrative
procedures established by the ADMINISTRATOR, commences or has
commenced against PARTICIPANT a bankruptcy case, or upon the
death of the PARTICIPANT.
(vii) Loan Security. By accepting a loan, the PARTICIPANT is giving a
security interest in their vested PLAN balance as of the loan process
date, together with all additions thereof, to the PLAN that shall at all
times be equal to 100% of the unpaid principal balance of the loan
together with accrued interest.
(viii) Loan Amount. The maximum amount of any loan permitted under the
PLAN is the lesser of (i) 50% of the PARTICIPANTS vested account
balance less any outstanding loan balances under the PLAN or (ii)
$50,000 less the highest outstanding loan balance during the preceding
one-year period. The ADMINISTRATOR shall establish the minimum
loan amount. The PARTICIPANT and not the ADMINISTRATOR shall
at all times remain responsible for ensuring that any loan received under
the PLAN is in accordance with these limits with regard to any other
loans received by the PARTICIPANT under any other plans of the
PARTICIPANT's employer.
2
DC-3980-1102
16E 1
(ix) Loan Maintenance Fee. Until a loan is repaid in full, an annual loan
maintenance fee as established by ADMINISTRATOR will be deducted
from the PARTICIPANT'S ACCOUNT(s).
I-
(x) Loan Default Fee. At the time when a default occurs, a loan default fee
established by ADMINISTATOR will be deducted from the
PARTICIPANT'S ACCOUNT(s).
(c) The ADMINISTRATOR shall fix such other terms and conditions necessary
to the administrative maintenance of the provisions of this Section and as
necessary to comply with the IRC and regulations there under.
IN WITNESS WHEREOF, the undersigned has executed this Amendment this
day of ,20_.
i30~1J #' aUN!?K. a~~ ~~/It~,(/T
(Name of PLAN SPONSOR) By: L.E ~ b, a..; Sol v~.
3
OC-3980-1102
16E1
NATIONAL ASSOCIATION OF COUNTIES
DEFERRED COMPENSATION PROGRAM
PARTICIPANT LOAN ADMINISTRATIVE PROCEDURES
Nationwide Retirement Solutions, Inc. ("NRS"), as Third Party Administrator of the National Association of
Counties Deferred Compensation Program, administers your Deferred Compensation Plan for Public
Employees ("Plan"). Recently issued proposed regulations under Internal Revenue Code Section 457 provide
that eligible governmental 457(b) plans may permit loans to Participants. NRS recommends that you, as Plan
Sponsor and/or Employer (hereinafter collectively referred to as "Plan Sponsor"), consult with your own legal
advisor in determining whether you wish to add this optional feature to your Plan.
In the event that you decide to offer loans from your Plan to Participants, you will need to return to NRS at
Nationwide Retirement Solutions, PO Box 182797, Columbus OH 43272.8450, Attn: Loans
Administrator a fully executed original of this document and a fully executed original of the enclosed Plan
Document Amendment. NRS cannot begin processing Participant loans from your Plan until it receives fully
executed originals of both of these documents.
NRS may need from time-to-time to make changes to the administrative procedures set forth herein and in the
Plan Document Amendment. In such a case, NRS will provide you with timely notice of such changes as they
become necessary.
The following administrative procedures shall govern the making of loans from your Plan:
1. Loan Administration. Plan Sponsor delegates to NRS certain administrative duties regarding the
administration of loans from the Plan, which are set forth herein and which may be modified by NRS upon
timely notice to Plan Sponsor.
2. Loan Eligibility. Any Plan Participant is eligible for a loan from the Plan. Each Participant is entitled to
one (1) loan at any time. In addition, a Participant who has defaulted on a previous loan shall not be eligible for
another loan from the Plan until all defaulted loans are repaid in full, including accrued interest and fees.
3. Loan Application and Loan Agreement. In order to receive a loan from the Plan, an eligible
Participant must complete a loan application and return it to NRS. A loan application fee of $50.00* will be
deducted from the Participant's account(s). Before a loan is issued, the Participant must enter into a legally
enforceable loan agreement as provided by NRS. If the Plan Sponsor permits loans for the purchase of the
Participant's principal residence, the Participant will be required to sign a Primary Residence Certificate form
and provide NRS with a copy of the contract or other documents relating to the acquisition of the dwelling unit.
If the source for a single loan includes both the Participant's Deferred Compensation and Eligible Rollover
Accounts, the Participant will be required to complete a loan application and loan agreement for each account
which will be treated as separate and distinct for all purposes herein except that they will be considered a
single loan for purposes of Sections 2, 6, and 10 herein.
4, Loan Repayment/Maximum Loan Term Repayment of any loan made to a Participant shall be made
in a manner and pursuant to the terms set forth in loan agreement. The Participant receiving a loan shall be
required to furnish the information and authorization necessary to effectuate the foregoing payments prior to
the commencement of a loan. The maximum term over which a loan may be repaid is five (5) years (fifteen
(15) years if the Plan Sponsor permits loans for the purchase of the Participant's principal residence).
* These fees, rates, and minimums are subject to change by NRS upon reasonable notice to the Plan Sponsor. Loan fees will appear
as administrative charges on Participant Statements.
DC-3983-1102
16E1
In the event that a Participant elects to receive a distribution from the Plan (other than a distribution due to an
unforeseeable emergency or other in-service withdrawal) at a time when such person has a Plan loan
outstanding, the principal and any accrued interest with respect to such loan shall be taxable.
5. Loan Amortization. Each loan shall be amortized in substantially equal payments consisting of
principal and interest during the term of the loan. Payments of principal and interest shall be made in a manner
and pursuant to the terms set forth in the loan agreement on a monthly basis in equal amounts, except that the
amount of the final payment may be higher or lower. Before the loan is made, the Participant will be notified of
the date on which the first payment will be deducted and the dates on which subsequent payments are due.
6. Loan Frequency/Renegotiations. Each Participant may have only one (1) Plan loan outstanding at
any given time. A Plan loan which is in default, even if the defaulted loan was treated as a "deemed
distribution" under federal regulations, shall be treated as an outstanding loan until such Participant's account
balance is offset by the amount of principal and accrued interest under the loan. NRS shall offset a defaulted
loan at any time that is administratively practicable, including but not limited to severance from employment by
the Participant or upon a request for a distribution from the Plan. A Participant will be granted a loan no more
frequently than two (2) times in any twelve (12) month period. Under no circumstances may loan terms be
renegotiated. A new loan shall not be granted prior to the repayment of an outstanding loan.
7, Default. The Participant must pay the full amount of each payment (principal and interest) on the date
that it is due by having sufficient funds in the account designated for loan payments through the ACH process.
If NRS is unable to process a payment on the date due because the Participant fails to have sufficient funds in
the account on that date, NRS will assess a fee of $25.00 that will be deducted from Participant's account(s)
and will send written notification to the Participant. The Participant shall be in default for the entire amount of
the loan UNLESS the Participant does each of the following: 1) contacts NRS at the Deferred Compensation
Service Center, 2) mutually agrees with NRS on a date, which is within 30 days of the missed payment on
which funds sufficient to cover the missed payment will be in the account and; 3) actually pays the missed
payment. Failure to make such a payment through mutually agreeable terms shall cause the Participant to be
in default for the entire amount of the loan. The loan also shall be defaulted upon the death of the Participant or
if the Participant commences or has commenced against Participant a bankruptcy case. No additional loans
shall be made to a Participant who has defaulted on a Plan loan and who has not repaid all defaulted loans in
full, including accrued interest and fees.
8. Loan Prepayment. The entire amount of a loan, including outstanding principal and any accrued
interest, may be paid without penalty prior to the end of the term of the loan in the manner prescribed by NRS.
However, payments made that are less than the remaining principal amount of the loan and any accrued
interest with respect to the loan, or which are not paid in the form prescribed by NRS, are not permitted.
9. Loan Security. By accepting a loan, the Participant is giving a security interest in his or her vested
Plan balance as of the date of the Loan Process Date, together with all additions thereof, to the Plan that shall
at all times be equal to 100% of the unpaid principal balance of the loan together with accrued interest.
10. Maximum/Minimum Loan Amount. The maximum amount of any loan permitted under the Plan is the
lesser of (i) 50% of the Participant's vested account balance (not including any value attributable to applicable
life insurance or deemed IRA account) less any outstanding loan balances under the Plan or (ii) $50,000 less,
the highest outstanding loan balance during the preceding one-year period. The minimum loan amount'
permitted is $1,000.00*. Loans shall be made in accordance with these limits and those limits imposed under
federal regulations without regard to any other loans received by the Participant from any other investment
provider under the Plan or any other plan of the employer. The Participant and not NRS shall at all times remain
responsible for ensuring that any loan received under the Plan is in accordance with regard to any other loans
received by the Participant under any other plans of the Participant's employer. Any tax reporting required as a
*
These fees, rates, and minimums are subject to change by NRS upon reasonable notice to the Plan Sponsor. Loan fees will appear
as administrative charges on Participant Statements.
DC-3983-1102
16El
result of the receipt by a Participant of a loan that exceeds the limits imposed by federal regulations shall not be
the responsibility of NRS, unless it is determined that such limits were exceeded solely as a result of a loan
made through NRS as service provider. Consequently, NRS shall not be required to account for loans made
pursuant to a plan other than this Plan or loans made under this Plan that are made by an investment provider
other than Nationwide Life Insurance Company.
11. Suspension of Loan Payments. NRS may suspend a Participant's obligation to repay any loan under
the Plan during the period in which the Participant is performing service in the uniformed services as may be
required by law. At the expiration of any suspension of loan payments period, the outstanding loan balance,
including any accrued interest and fees, will be re-amortized and the Participant will be required to execute an
amended Loan Agreement.
12. Loan Interest Rate. The interest rate for any loan shall be established by NRS. These interest rates
shall commensurate with interest rates being charged by entities in the business of lending money under
similar circumstances. Generally, the rate assumed will be Prime Rate + 1.00%*. The Prime Rate shall be the
prime rate published by the Wall Street Journal two weeks prior to the end of the most recent calendar-year
quarter, NRS may adjust the loan interest rate for Participants entering active duty in the military services as
may be required by law.
13. Annual Loan Maintenance and Asset Fees. An annual loan maintenance fee of $50.00* will also be
deducted from the Participant's account until the loan is repaid in full. The amount of the outstanding loan
balance will be subject to the Asset Fee equal to the maximum Variable Account Annual Expense Fee
applicable under the Plan at the time the loan is issued.
14. Loan Default Fee. At the time when a default occurs, a $50.00* loan default fee will be deducted from
the Participant's account. This charge will only affect Participants who fail to make a required loan payment.
15. Loans for the Purchase of a Principal Residence. All loans issued by the Plan will be general loans
to be repaid in five (5) years unless the Plan Sponsor affirmatively elects to offer loans for the purchase of the
Participant's principal residence, which may be repaid in fifteen (15) years. Such loans shall be solely secured
by the Participant's vested account balance. All administrative procedures set forth herein shall apply to such
loans.
If the Plan Sponsor elects to permit loans for the purchase of the Participant's principal residence,
please check this box. 0
The undersigned Plan Sponsor hereby adopts these Participant Loan Administrative Procedures, effective for
loans issued on or after the effective date set forth in the Loans to Participants Amendment to Plan Document,
and instructs NRS to administer loans made to Plan Participants in accordance with these terms.
The Plan Sponsor acknowledges the following: (i) that the Plan Sponsor has decided to offer loans under the
Plan and is instructing NRS to administers loans under the Plan; (ii) that it understands that, as a result of
offering loans under the Plan, the Plan Sponsor, its Participants, and/or the Plan could be subject to adverse
tax consequences; (Hi) that the Plan Sponsor has independently weighed this risk and has determined that
offering loans under the Plan is in the best interest of the Plan Sponsor, its Participants, and the Plan; and (iv)
NRS shall not be liable for any adverse tax consequences described in (ii), except as specifically stated under
paragraph 10 herein, resulting from the Plan Sponsor's decision to offer loans under the Plan.
*
These fees, rates, and minimums are subject to change by NRS upon reasonable notice to the Plan Sponsor. Loan fees will appear
as administrative charges on Participant Statements.
DC-3983-1102
16E1
Plan Sponsor
or Employer:
Street Address:
60A-~l) e/f! (1 <..-tJ I ~ r!.oVN"1
~03 e, IA-th 'Il-rn" TItA-J. L.
60 V"'PJl..l\1 m eA..J T
City, State, Zip Code: NP.(J Le~, ~J.,c)~Jhf+
Plan Name: f,!)()IM.O uP f!t;LUelf{ totJlVTf 61JYt!1eh'd1€A/T ./)e P'J#~eLJ ~~J9.'T;~ r2.;t;-4!
Entity No.: t) ~.3 ~ "1 3 () 00 /
Plan Entity: J!JOFJ-/ZlJ lJP ~U-.I~ &VA/ry ;tdY~l'C,...,rneN r
By: /l'J1\. 1. e oE(5c!, S, vI<.
.
Its: (0 U oN ''Hj m /9'71//96 e K
E-mail Address: OpeLIA- 779e. LOA.,) (fJ i-OL.c/e~t::.6VI /Ve.~ pL.J:bJ ~oI<-0/1l1,.q/a~
Date:
*
These fees, rates, and minimums are subject to change by NRS upon reasonable notice to the Plan Sponsor. Loan fees will appear
as administrative charges on Participant Statements.
DC-3983-1102
A
ICMARC
Building Retirement Security
16E 1
LOAN PROGRAM IMPLEMENTATION AT-A-GLANCE
In this Loan Program Implementation Package, you will find:
· A Guide to Implementing a Loan Program - This brochure details the issues you should consider in design-
ing your loan program.
· Loan Guidelines Agreement for a Retirement Plan - These guidelines must be completed before loans can
be made from your retirement plan. This document enables you to establish the features of your loan
program.
· Suggested Resolution for a Legislative Body Relating to Amending a Retirement Plan to Permit Loans - We
have included one version that can be used for any plan type - Section 457 Deferred Compensation
plans, Section 401 Money Purchase plans, and Section 401 Profit-Sharing plans. If your governing body
requires that a resolution be passed when amendments are made to the plan, we have included a suggested
resolution for your use. If your governing body does not require that a resolution be passed, please disre-
gard the suggested resolution.
· Loan Administration Agreement for 457 Plans - This document applies only to 457 plans where more than
one provider is involved in loan administration. If you have adopted a single 457 plan document under
which ICMA-RC and one or more other providers must operate, you may ultimately have to self-admin-
ister your loan program unless you agree to the requirements specified in this Agreement.
· Amendment to 401 Plan Adoption Agreement - This document applies to 401 plans only and amends your
current plan to allow loans.
Steps to Implement a Loan Program for your ICMA-RC Retirement Plan:
(1) Carefully read A Guide to Implementing a Loan Program.
(2) Complete the Loan Guidelines Agreement.
(3) Using the Suggested Resolution as a guide, obtain a resolution from your governing body to adopt the
loan provision (if required).
(4) Execute the Loan Administration Agreement (457 plans only) or the Amendment to Adoption Agreement
(401 plans only).
(5) Return the completed Loan Guidelines Agreement, a copy of the resolution (if required by your entity),
and either the Loan Administration Agreement (457 plans) or the Amendment to Adoption Agreement (401
plans) to:
ICMA-RC
Attention: New Business Analyst
777 North Capitol Street NE
Washington, DC 20002-4240
Please allow 10 business days to set up your plan to allow loans.
Please contact our Client Services Team at 1-800-326-7272 if you have any questions about implementing your Re-
tirement Plan Loan Program.
16E 1 '
A GUIDE TO
IMPLEMENTING
A LOAN PROGRAM
IcMARC
Bui/Jing Retirement Security
ICMA-RC
16E1
A loan program in your retirement plan provides eligible plan
participants the ability to borrow funds from their plan account
balance. Adding loans to your retirement plan is a big step. As
the administrator of your loan program, ICMA-RC will at-
tempt to minimize the amount of resources you need to devote
to the program.
However, there are administrative and fiduciary responsibil-
ities associated with offering loans which, as a practical mat-
ter, cannot be delegated to ICMA-RC. For this reason, before
you design a program that is right for you and your employees,
there are several issues you may wish to consider. And the deci-
sions you make in designing your loan program will determine
the resources you, as the plan sponsor, will have to commit to
that program.
This brochure details the issues you should consider in design-
ing your retirement plan loan program.
LOAN GUIDELINES
In order to offer loans from a retirement plan, the Internal Rev-
enue Code (the Code) requires that you establish written guide-
lines that govern the granting of loans. Included in this packet
is the Loan Guidelines Agreement that you must complete and
formally adopt to establish your loan program.
Along with completing the Loan Guidelines Agreement, you
must amend your plan document to allow loans. You will need
to send to ICMA-RC a statement executed by a designated
official or resolution approved by your governing body, as
applicable to your plan. In addition, if you are adding a loan
provision to a 401 plan, the adoption agreement applying to
that plan must be amended, A sample resolution and an adop-
tion agreement amendment form are included in this package.
If you have any questions about amending your plan document
to allow for loans, please call our Client Services Team toll-free
at 1-800-326-7272.
The Code provides you with some flexibility when establishing
your Loan Guidelines as long as the guidelines are consistent
with the plan document provisions on loans and with section
72(p) of the Code.
1. Eligibility (Section II in Loan Guidelines
Agreement)
You may allow a loan to be taken from (1) vested employer
contributions and/or (2) participant account balances, You
may designate whether or not a loan may be taken
(A) for all purposes or
(B) only in the case of hardship or other certain specified
financial situations.
401 Plans: Under the Code, only employers can authorize a
hardship for loan purposes. Upon request, ICMA-RC will
provide an opinion to you concerning the likely compli-
ance of the hardship within the requirements of the Code
and regulations. Normally, for loan purposes, hardship and
other specified situations include, but are not limited to:
unreimbursed medical expenses, buying or rehabilitating
the participant's principal residence, and paying for college
education for the participant or his/her dependents. Car
loan, car repairs, and the purchase or repair of a vacation
or rental property would not be included in the hardship
definition.
The option you choose to define "loan purpose" in the Eli-
gibility section will have a significant impact on the number
of loans made from your plan. Obviously, if you choose "for
all purposes," more of your employees will request loans
than if you select "hardship or other specified financial situ-
ations only."
457 Plans: Loans must be coordinated with unforesee-
able emergency withdrawals. The emergency withdrawal
regulations under Section 457 of the Code require that an
emergency withdrawal be a resource of the "last resort." If
the participant is able to take a loan from your ICMA-RC
457 plan or any other plan you sponsor, the participant has
resources available to meet, or partially meet, the financial
need. Therefore, a participant will be required to take a loan
before taking an emergency withdrawal.
Many emergency withdrawals are not approved because the
financial need, while serious, may not meet the conditions
itemized in the 457 regulations, The ability to take a loan
will allow participants access to money that is not otherwise
available. And the repayment provisions for loans ensures
that participants replenish their accounts, thereby preserv-
ing their retirement savings.
2. Frequency of Loans (Section III in Loan Guidelines
Agreement)
Participants may receive only one loan per calendar year.
However, you may elect to allow participants to have either
(A) only one loan outstanding at a time or
(B) no more than five loans outstanding at one time.
The option you choose under Frequency of Loans will have
an impact on the number of loans made from your plan. It
may also have a direct impact on your payroll system if you
select Payroll Deduction as a repayment option for your
participants. Each loan repayment for each pay period must be
accounted for separately. Repayments of multiple loans are a
much larger burden on your payroll system (and personnel)
than a repayment of a single loan.
2
A Guide to Implementing a Loan Program
16El
3. Length of Loan (Section V in Loan Guidelines
Agreement)
Generally, all loans must be repaid within five years from
the date the loan is made. There is an exception for loans
used to buy, but not to improve or repair, a principal resi-
dence. In the case of a loan for buying a principal residence,
you may specify the number of years, not to exceed 30, over
which the loan must be repaid.
In determining the maximum repayment period for res i-
dentialloans, you should be mindful that the loan term
may extend beyond the period the participant is employed
by you. If you allow employees to continue to pay their
loans after they separate from service (see Acceleration of
Loan Repayment on the next page), repayments would
continue by the participant, through you, for the entire
term of the loan (e.g., 30 years). Every payroll period, the
participant (former employee) will be required to give you
a check for the periodic loan repayment amount. You then
include this amount with your next contribution submittal
to ICMA-RC Loan repayments may not be made directly to
ICMA-RC by the participant, unless you choose ACH debit as
a repayment option.
4. Loan Repayment Process (Section VI in Loan Guidelines
Agreement)
All loans must be repaid either through payroll deduction
or through ACH debit as long as the employee is actively
employed by you. For payroll deducted payments,
ICMA-RC's media used for remitting contribution detail
(e.g. EZLink, magnetic tape, or diskette) allow for the
inclusion of loan repayment detail. Participants may pay
off their loans early by requesting that you submit a larger
repayment amount from their pay on their regularly sched-
uled repayment dates through your contribution submittals
to ICMA-RC Please note that no payment date may be
"skipped" even if the employee has made a large payment or
submitted multiple payments.
The enclosed Loan Guidelines Agreement form allows
your plan to offer a participant the option of making loan
repayments via direct debit of the employee's bank account,
Direct debit is authorized by the participant and allows
ICMA-RC to debit loan repayments from the participant's
bank account via Automated Clearing House (ACH). With
this feature, you are free of the burden of establishing and
monitoring payroll deduction and submitting of repay-
ments to ICMA-RC
Please note that you will not be notified directly when
a participant's bank account has insufficient funds for a
complete loan repayment. The EZLink loan reports that
will be available to you online will provide this informa-
tion. It is possible that participant loans may default more
often for lack of repayment when participants choose
ACH repayment rather than payroll deduction, You may
choose to restrict certain participants to payroll deduction
for this reason.
In implementing a loan program you should be aware that
some employers who offer loans through their retirement
plan have had to contend with the inability of some partici-
pants to repay their loan(s). You should be aware that you
may not stop taking loan repayments from the employee's
paycheck - even if the employee asks that repayments be
stopped. Failure to payroll-deduct loan repayments on sched-
ule could both jeopardize the eligibility or qualification of the
entire plan as well as create a taxable event for the participant.
Likewise, if an employee is repaying the loan through ACH
debit of his/her bank account, and the employee fails to
make payments, this could jeopardize the eligibility of your
retirement plan. Employers are ultimately responsible for
ensuring that loans are repaid according to the loan terms.
ICMA-RC assists you by notifying both you and the em-
ployee if a payment has not been received.
Your plan may allow terminated employees to continue to
repay their loans either through ACH debit of their bank
account, or by giving/sending you a check each repayment
period (refer to Acceleration of Loan Repayment section
on page three), If you adopt this latter repayment method,
you will include the repayment amount given to you by the
former employee in your next regular employee contribu-
tion remittance to ICMA-RC
If a participant has more than one loan outstanding at any
one time, then each loan repayment must be separately
reported to ICMA-RC
5. Loan Application Procedures (Section VIII in Loan
Guidelines Agreement)
(A) Active Employees Only - Loans are available only to
active employees. Former employees, beneficiaries, and
alternate payees may not take a loan.
(B) Request Submittal- Loan requests may be submitted
by participants through the Direct Application (writ-
ten form) or on Account Access, ICMA-RC's online
account program. To offer these features, the employer
pre-authorizes ICMA-RC to approve loan requests.
Otherwise, all loan requests must be in writing, signed
by the participant, and approved by you, the employer.
Under the Code, the amount of the loan may not
exceed a maximum amount. The amount available for a
loan is affected by all other loans the participant may have
outstanding or has recently paid off .from your ICMA-RC
retirement plan, and any other retirement plans you spon-
sor. Please refer to page 7 for a worksheet illustrating
how maximum loan amounts are calculated. The loan
modeling program in Account Access incorporates this
calculation automatically.
3
16El
4
ICMA-RC
(C) Check Issuance - Unless you select Direct Application
or online (Account Access) application, the participant
is required to sign acceptance of a promissory note
evidencing the loan and a disclosure statement, which
includes an amortization schedule. Upon receipt of
an approved loan application, ICMA-RC will prepare
these loan documents and send them, along with the
loan check. The loan check may not be given to the
participant until all of these loan documents have been
signed by the participant. Once the loan documents
are signed, you return them to ICMA-RC. Because
the promissory note is considered a plan asset, all loan
documents must be complete and preserved by
ICMA-RC for at least the life of the loan.
With online loans or Direct Application, ICMA-RC
sends loan documents with the check to the partici-
pant. When the participant endorses the check, that
signifies acceptance of terms.
For payroll-deducted loan repayments, once a loan is
issued, your payroll department must ensure that loan
repayments are withheld from the employee's paycheck
each pay period, in the amount specified or the amor-
tization schedule, until the loan is repaid in fulL It is
essential that the amortization schedule coincide with
your payroll cycle. ICMA-RC can help you determine
the first pay date on which you should withhold loan
repayments.
6. Acceleration of Loan Repayment (Section X in Loan
Guidelines Agreement)
You have three options for determining how outstanding
loans are accelerated:
A. All loans are due and payable in full upon the employ-
ee's separation from service. The employee may not
continue to pay off his/her loan once he or she sepa-
rates from service.
B. Mter separation from service, all loans are due and pay-
able in full as soon as the participant takes a withdrawal
of any amount from the plan.
C. Mter separation from service, all loans are due and pay-
able in full only when the participant withdraws his/her
entire account balance,
You should consider these options carefully, since each pro-
vision could result in a taxable event for the participant. If a
participant does not repay the outstanding loan amount at
the time it is due, the loan is "foreclosed." This means that
the outstanding loan amount must be reported by the plan
administrator (ICMA-RC) as a taxable distribution in the
year of the foreclosure.
On the other hand, given the burdens associated with col-
lecting loan repayments from former employees, you may
not wish to maintain a potentially long term "relationship"
with former employees (especially in the case of residential
loans).
You should carefully consider the level of responsibility each
option entails.
7. Deemed Distribution of Delinquent Loans (Section
XIV in Loan Guidelines Agreement)
Internal Revenue Service (IRS) regulations governing
participant loans issued after December 31, 2001, have
provided clarification on requirements for loan processing.
The regulations have always established loan criteria such as
term and borrowing limitations. However, the regulations
now specifically illustrate how plan sponsors should treat
delinquent loans, which violate the special rules allowing
loans to be made from retirement plan assets.
A loan typically becomes a deemed distribution when
scheduled payments are not made in adherence with the
granted "cure period." The maximum allowable cure
period is the end of the calendar quarter following the cal-
endar quarter in which the payment was due. For example,
if a participant's loan payment is due February 1st, the
maximum cure period for the repayment is June 30th. If
the total amount of all delinquent payments is not received
by the end of the cure period, the loan is deemed a distri-
bution, The principal balance, in addition to any accrued
interest, is reported as a distribution to the IRS. However,
the taxable distribution is not the only event in conjunction
with a deemed distribution. The following negative conse-
quences occur as a result of deemed distribution.
· The deemed distribution is a taxable event. However,
it is not an actual distribution and therefore remains
an asset of the participant's account. The outstanding
loan balance and accrued interest are reported on the
participant's account statement.
· Repayment of a deemed distribution will not change or
reverse the taxable event,
· The loan continues to be considered outstanding until
it is repaid or "offset" using the participant's account
balance. An offset can occur only if the participant is
eligible to receive a distribution from the plan as out-
lined in your plan document.
· ICMA-RC requires participants to repay any outstand-
ing deemed distributed loan before they can become
eligible for a new loan. The deemed distributed loan
and any interest accrued since the date it became a tax-
able event is taken into account when determining the
maximum amount available for a new loan.
· A recent IRS ruling requires that a participant who has
had a prior deemed distribution must make repayments
4
A Guide to Implementing a Loan Program
16E I
to a new loan through payroll deduction, or provide
proof of adequate security.
Employers, as plan sponsors and fiduciaries, have an obliga-
tion to comply with plan document and loan guideline
requirements applicable to participant loans. In this regard,
loan payments must be made in accordance with the plan
document, plan loan guidelines, and as reRected in the
promissory note signed by the participant. Employers
retain this obligation if there is a loan program associated
with their retirement plan, even if participants apply for
loans online, and regardless of the method of repayment -
whether participants are repaying their loans through ACH
debit or payroll deduction.
Employers who do not ensure proper loan repayment
practices in their retirement loan programs risk not only
having individual participant loans being deemed distribu-
tions, but also potentially jeopardize the tax-favored status
of the entire plan. In the extreme, plans with mismanaged
loan programs - a high occurrence of deemed distributed
loans, and/or program participants in default, for example
- may be disqualified (in the case of 40 1 plans) or classified
as ineligible (for 457 plans) by the IRS. Disqualification
results in the loss of tax-deferred status for all contributions
and a possible increase in the taxable income for participat-
ing employees.
It is a plan sponsor's and plan administrator's fiduciary obli-
gation to properly manage the retirement plan and its ben-
efits. Mismanagement of a loan program may be considered
failure to meet this fiduciary obligation and may expose a
plan sponsor to litigation, in addition to being in violation
of applicable laws and regulations.
To assist plan sponsors whose plan options include loans,
ICMA-RC will provide reports of participants with pay-
ments delinquent by 30 to 89 days, 90 or more days but
not yet deemed, and those whose loans have been deemed
distributed. ICMA-RC is committed to supporting employ-
ers who request assistance with their loan programs in order
to reduce the number of delinquent loans and decrease the
occurrence of deemed distributions.
SPECIAL CIRCUMSTANCES
If you have more than one retirement plan, ICMA-RC will ad-
minister your loan program, but you will have to perform some
loan verification activities. You will also have to perform these
activities if loans are available to your employees from several
like retirement plans, such as two different qualified plans, or if
you have different types of retirement plans (e.g. Section 457
deferred compensation and section 401 qualified plan). The
degree of your involvement will depend on your situation.
1. Multiple Plans
If you offer several retirement plans, each with its own plan
document and provisions unique to each administrator,
ICMA-RC and your other administrators should be able
to administer loans because these are distinct plans and
the loan provision applies at the plan level. However, the
Code sets a maximum on the aggregate of all loans from all
retirement plans in which the employee participates. No
provider will be able to calculate, by itself, the maximum
amount that a participant may borrow at any point in
time. Since only you, the employer, can determine the cur-
rent outstanding loan balance and the highest outstanding
loan balance in the past 12 months from all loans from any
retirement plans, you will have to calculate the maximum
amount that may be borrowed. This will involve obtain-
ing all loan amounts currently outstanding and repaid in
the last 12 months. For your convenience, ICMA-RC has
developed a worksheet to illustrate the maximum loan
amount available. [See Page 7, "Calculating the Amount
Available for a Loan,"]
If you elect online loans, participants are asked to input all
outstanding loan balances in their online worksheet so that
the program can properly calculate the maximum amount.
Participants are on the "honor system" when they enter
other loan amounts; ICMA-RC is unable to verify any loan
amounts associated with plans administered by other pro-
viders. However, if there are any outstanding loans in other
plans administered by ICMA-RC, our online program will
take them into account,
2. Single Retirement Plan/Multiple Providers
If you have adopted a single retirement plan with one
master plan document under which ICMA-RC and your
other administrator(s) must operate, then you may ulti-
mately have to self-administer your loan program, unless
you requite:
· that the maximum that may be borrowed from any
provider is 50 percent of the balance with that provider
and
· that the loan must be repaid only to the provider
from which the loan was made.
If you do nor impose these requirements, you may have to
self-administer your loan program. This is because of:
· Problems calculating the loan amount.
The amount available for a loan is based, in part, on
the total account balance in the plan. Since employees
may have balances with more than one of the admin-
istrators, only you, the employer, can determine the
actual account balance by aggregating the balance for
each administrator.
5
ICMA-RC
16El
The Code sets a maximum on the aggregate of all loans
from all retirement plans in which the participant par-
ticipates. Since only you can determine the current out-
standing loan balance and the highest outstanding loan
balance in the past 12 months from all loans from any
retirement plans, you will have to calculate the maxi-
mum amount that may be borrowed. This will involve
obtaining all loan amounts currently outstanding and
repaid in the last 12 months. For your convenience,
ICMA-RC has developed a worksheet to illustrate the
maximum loan amount available. [See Page 7, "Calcu-
lating the Amount Available for a Loan."]
· Problems preparing loan documents.
Each loan has terms and conditions that are reflected in
the promissory note, disclosure statement and amortiza-
tion schedule for the loan. Other providers may be able
to prepare these documents if given all the pertinent
information about the loan by you. However, the other
provider may be reluctant to provide documents for a
loan to which it is not a party. And it may be difficult
for the other provider's system to provide documents for
a loan in an amount that exceeds what its system shows
is available.
· Problems keeping accurate loan records,
Since loans are generally made and recordkept on a
plan level basis, theoretically, a participant could take a
loan in the amount of his/her entire balance with one
administrator because the loan is collateralized by the
balance with another administrator. And the partici-
pant may elect to allocate loan repayments either be-
tween administrators or to an administrator other than
the administrator who made the loan. Unless a loan is
unique to one of the administrators, both in amount
and repayment terms, only you, the employer, will be
able to track loan repayments, especially if repayments
are being made to more than one administrator.
3. Multiple Types of Retirement Plans/Multiple Providers
If you make loans available to your employees from all of
your retirement plans (e,g. Section 457 deferred compen-
sation plan and Section 401 qualified plan), each plan
administrator should be able to administer loans because
these are distinct plans and the loan provision applies at
the plan level. However, no administrator will be able to
calculate, by itself, the maximum amount that a partici-
pant may borrow at any point in time. This is because the
Code sets a maximum on the aggregate of all loans from
all 401 and 457 plans in which the participant partici-
pates. Since only you, the employer, can determine the
current outstanding loan balance and the highest out-
standing loan balance in the past 12 months from all loans
from any 401 or 457 plans, you will have to calculate
the maximum amount that may be borrowed, This will
involve obtaining all loan amounts currently outstanding
and repaid in the last 12 months. For your convenience,
RC has developed a worksheet to illustrate the maximum
loan amount available. [See Page 7, "Calculating the
Amount Available for a Loan."]
Many 457 plans are what are referred to as "co-adminis-
tered" plans. There are actually two different types of ar-
rangement both of which are referred to as co-administered
or co-provider plans:
(1) multiple 457 plans offered by an employer through two
or more administrators, each administrator having its
own plan document and features.
(2) a single 457 plan with multiple administrators provid-
ing essentially different investment options.
In both of these situations, it will be difficult for an ad-
ministrator to correctly administer a loan provision across
multiple plans. It will also be difficult for you to correctly
administer a loan's provisions in situations where you make
loans available to employees from your 457 plan(s) and
another retirement plan (e.g. Section 401 money purchase
or profit sharing plan).
CONCLUSION
You may be able to minimize your involvement in administer-
ing a loan program under either a single plan/multiple provider
arrangement or a multiple plan arrangement. However, you
cannot avoid having to determine whether each loan amount
requested is consistent with the aggregate maximum.
The above information is intended to provide an overview of
the issues and complexities of establishing and maintaining a
loan program under the most common types of retirement plan
arrangements. It is not intended to be all inclusive. Other issues
may arise and some issues may be mitigated by a plan's indi-
vidual design. Special situations and/or solutions not discussed
above will have to be analyzed on a case-by-case basis. Please
contact ICMA-RC's Client Services Team at 1-800-326-7272
with any questions related to these issues.
6
A Guide to Implementing a Loan Program
16El
CALCULATING THE AMOUNT
AVAILABLE FOR A LOAN
The minimum loan amount is $1,000.
The maximum amount of all loans to the participant from the Plan and all other plans sponsored by the Employer that
are qualified employer plans under section 72(p)(4) of the Code is the lesser of:
(1) $50,000, reduced by the highest outstanding balance of all loans from any 401 or 457 plans for that participant
during the one-year period ending on the day before the date a loan is to be made, or
(2) 50% of the participant's vested account balance, reduced by the current outstanding balance of all 401 and 457
loans from all plans for that participant.
If a participant has any loans outstanding at the time a new loan is requested, the new loan will be limited to the maxi-
mum amount calculated above reduced by the total of the outstanding loans.
In addition, each loan must be collateralized, at the time it is made, by one half of the participant's vested account bal-
ance in the plan from which the loan is being made. Therefore, the actual amount a participant may take as a loan is the
LESSER of the maximum dollar amount described above or 50 percent of the account balance.
Maximum Loan Amount Worksheet iR"lllllld lllldel dll IlIllllllil\e\llllll l "d, I
To estimate the maximum amount of a loan for which a participant may be eligible, calculate each step and
select the lesser of the total of Step 1 or Step 2. If the participant has had no outstanding 401 or 457 plan
loans in the last 12 months, you may enter $50,000 as the total in Step 1 and proceed to Step 2.
Step 1.
$50,000
A. $50,000 is the maximum.
B. Enter the highest outstanding loan balance during the previous 12
months from 457 and 401 plan loans.
Step 2.
C. Enter 50% of the present value of the total account balance
in the plan from which the loan will be issued, including any
outstanding loan balance.
D. Enter the current outstanding 401 and/or 457 plan loan
balance(s).
The actual amount that may be borrowed will be calculated using the participants account
balance on the day the loan ;s made.
7
16El
LOAN GUIDELINES AGREEMENT FOR A
RETIREMENT PLAN
ICMARC
Building Retirement Security
ICMA-RC
16El
INSTRUCTIONS
(Please refer to the previous section, .. A Guide to Implementing a Loan Program")
These Loan Guidelines must be completed before loans can be made from your retirement plan. You should consider each option
carefully before making your selections because your selections will apply to all loans made while the selection is in effect. If you
later change any provision, the changes will apply only to loans made after the change is adopted. Loans in existence at the time of
any future changes will continue to operate under the guidelines that were in effect at the time the loan was originally made.
Note: Ifloans are available to your employees from other plans (e,g. other Section 457 deferred compensation plans or other Sec-
tion 401 plans), calculation of the maximum loan amount must consider the aggregate of all loans from all 401 and 457 plans
in which the employee participates. See the Maximum Loan Amount Worksheet on page 7 of A Guide to Implementing a Loan
Program, found in this packet.
2
Loan Guidelines Agreement
16E 1
Name of Plan (please state the Employer's complete name, includingstate): .&A'-A'..(\ c/P &u"..1 ~ eo 1/ AI '"Y
&0 1"~/("'/11e.I\JT (e""/ut. ~v""~. P/.,O/f-IO",",)
Plan Type: 0 401 (a) Money Purchase Plan 0 401 Profit-Sharing Plan ~ 457 Deferred Compensation Plan
ICMA-RC Plan Number:
30~A 01
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 Provision 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 will be pro-rated among all the funds in which the participant is invested at the time the loan is made.
For 401 plans only:
Loans are available from the following sources: [select one or both]
o Employer Contribution Account (vested balances only)
o Participant Contribution Accounts (pre- and post-tax, if applicable, including Employee Mandatory, Employee Voluntary,
Employer Rollover, and Portable Benefits Accounts, but excluding the Deductible Employee Contribution/Qualified Volun-
tary Employee Contribution Account)
For Roth 401(k) plans on~:
A participant's Designated Roth Account balance can be used to secure a participant loan.
Designated Roth Account balances [select one]
o will not (default option) be available as a source for loans under the Plan,
o will be available as a source for loans under the Plan, (Note: Using the Roth source for loans may have negative tax con-
sequences for participants.)
For all plan types:
Loans are available for the following purposes: [select one]
~ All purposes
o 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 approve the participant's loan application after determining, based
on all relevant facts and circumstances, that the amount of the loan is not in excess of the amount required to relieve the fi-
nancial need. For this purpose, financial need shall include, but not be limited to: unreimbursed medical expenses of the par-
ticipant 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.
3
ICMA-HC
16E 1
III. Frequency of loans [select one]
~ Participants may receive one loan per calendar year. Moreover, participants may have only one (1) 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.
IV. Loan amount
The minimum loan amount is $1,000.
The maximum amount of all loans to the participant from the plan and all other plans sponsored by the Employer that are qualified
employer plans under section n(p) (4) of the Code is the lesser of:
(1) $50,000, reduced by the highest outstanding balance of all loans from any 401 or 457 plans for that participant during
the one-year period ending on the day before the date a loan is to be made, or
(2) one half of the participant's vested account balance, reduced by the current outstanding balance of all 401 and 457 loans
from all plans for that participant.
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 calcu-
lated above reduced by the total of the outstanding loans.
A loan cannot be issued for more than the above amount. The participant's requested loan amount is subject to downward adjustment
without notice due to market fluctuation between the time of application and the time the loan is made.
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 five (5) years.
Loans for a principal residence must be repaid in substantially equal installments of principal and interest, at
least monthly, over a period that does not exceed [state number of years] years (maximum 30 years).
VI. Loan repayment process
Loan repayments for active employees must be through (choose one):
o Payroll deduction only.
PL642(2) = 2
~ ACH debit only.
PL642(2) = 0
o Employee may choose either payroll deduction or ACH debit.
PL642(2) = I
If payroll deduction repayment is allowed, and the employee wishes to use this method, the employee must notify the Employer
so that the Employer can ensure that repayment will begin as soon as practicable on a date determined by the Employer's payroll
cycle. Failure to begin payroll deduction in a timely way could lead to the employee's loan entering delinquenCy status. Payroll
deduction should begin within two payroll cycles following the employee's receipt of the loan.
4
Loan Guidelines Agreement
16EI
Repayments through payroll deduction will be sent via check or wire by the Employer to ICMA-RC on the following cycle
(choose one):
o Weekly (52 per year)
OBi-weekly (26 per year)
o Semi-monthly (24 per year)
o Monthly (12 per year)
If ACH debit repayment is allowed, debits from the employee's designated bank account will begin approximately one month fol-
lowing the date the employee's signed ACH authorization form is received and processed by ICMA-RC, or, in the case of online
loans, approximately one month following the date the loan check has been cleared for payment, Debits will normally be made on
a monthly basis,
Loans outstanding for former employees or 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 that provides that sub-
stantially equal payments are made at least monthly over the remaining period of the loan.
Loan payments, including loan payments from former employees, are allocated to the participant's current election of investment
options on file with ICMA-RC
The participant may payoff all or a portion of the principal and interest early without penalty or additional fee. Extra payments
are applied forward to both principal and interest as specified in the original repayment schedule, unless the additional payment is
for the balance due.
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 FHAlVA 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 www.nfsn.com as the source. The FHAlVA
interest rate is also determined on the last business day of each month using www/bankofamerica.com as the source.
Loan interest rates for new loans taken in different months may fluctuate upward or downward monthly, depending on the move-
ment of the prime and FHANA 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
Loans must be requested using the following method (check one):
o Online only: All loans must be requested online by employees through ICMA-RC's Account Access site at
www.icmarc.org, with Employer pre-authorization as outlined in italics below.
If an employee is married at the time of application, and spousal consent is required by the Plan for the loan, the employ-
ee's spouse must consent, in writing, to the loan and the consent must be witnessed by a plan representative or notary
public. Such consent must be received in writing by ICMA-RC no more than ninety (90) days before the loan request is
submitted through Account Access.
The promissory note, truth-in-lending rescission notice and disclosure statement are presented to the employee online
through Account Access at the time the employee submits the loan request. The employee confirms receipt and acceptance
of these documents by clicking on the affirmative buttons on the Account Access program.
5
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ICMA-HC
The employer hereby authorizes all future loans requested through the online process via Account Access, as well as any requests
that employees submit on paper forms, pending review of the application by ICMA-RG. Notice of loan issuance will be provided
to the Employer via reports posted on the EZLink site.
The loan amount will generally be redeemed from the employee's account on the same day as the employee's successful
submission of the loan request through Account Access, if it is submitted prior to 4:00 p.m. ET on a business day. If not,
the loan amount will be redeemed on the next business day following submission. The loan check is generally issued on
the next business day following redemption, and will be mailed directly to the employee. The employee's presentment of
the loan check for payment constitutes an acknowledgment that the employee has received and read the loan disclosure
information provided by ICMA-RC and agrees to the terms therein,
Loan repayment will begin as soon as practicable following the employee's presentment of the loan check for payment.
__ Online and through Direct Loan application: All loans must be requested either online by employees through
ICMA-RC's Account Access site at www.icmarc.org, or through the Direct Loan application, both of which require pre-
authorization by the Employer as outlined in italics below.
If an employee is married at the time of application, and spousal consent is required by the Plan for the loan, the employ-
ee's spouse must consent, in writing, to the loan and the consent must be witnessed by a plan representative or notary
public. Such consent must be received in writing by ICMA-RC no more than ninety (90) days before the loan request is
submitted through Account Access. In the case of the Direct Loan Application, spousal consent should be sent along with
the application.
The promissory note, truth-in-lending rescission notice and disclosure statement are mailed to the employee along with
the issued loan check. The employee confirms receipt and acceptance of these documents and terms at the time the en-
dorsed check is presented for payment.
The Employer hereby authorizes all future loans requested through the online process via Account Access, as well as any requests
that employees submit on paper forms, pending review of the application by ICMA-RG. Notice of loan issuance will be provided
to the Employer via reports posted on the EZLink site,
The loan amount will generally be redeemed from the employee's account on the same day as either ICMA-RC's receipt
of a loan application (complete and in good order), or the employee's successful submission of the loan request through
Account Access, if it is submitted prior to 4:00 p.m. ET on a business day. If not, the loan amount will be redeemed on the
next business day following submission. The loan check is generally issued on the next business day following redemption,
and will be mailed directly to the employee. The employee's presentment of the loan check for payment constitutes an ac-
knowledgment that the employee has received and read the loan disclosure information provided by ICMA-RC and agrees
to the terms therein.
Loan repayment will begin as soon as practicable following the employee's presentment of the loan check for payment.
o Direct Loan application only: All loans must be requested through the Direct Loan application, which requires pre-
authorization by the Employer as outlined in italics below.
If an employee is married at the time of application, and spousal consent is required by the Plan for the loan, the employ-
ee's spouse must consent, in writing, to the loan and the consent must be witnessed by a plan representative or notary
public. Such consent must be received in writing by ICMA-RC along with the Direct Loan Application.
The promissory note, truth-in-lending rescission notice and disclosure statement are mailed to the employee along with
the issued loan check. The employee confirms receipt and acceptance of these documents at the time the endorsed check is
presented for payment.
The employer hereby authorizes all future loans requested on paper forms, pending review of the application by ICMA-RG. Notice
of loan issuance will be provided to the Employer via reports posted on the EZLink site.
The loan amount will generally be redeemed from the employee's account on the same day as ICMA-RC's receipt of a loan
application (complete and in good order).
6
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Loan Guidelines Agreement
The loan check will generally be issued from the employee's account on the next business day following redemption. The
loan check will be mailed directly to the employee. The employee's presentment of the loan check for payment constitutes
an acknowledgment that the employee has received and read the loan disclosure information provided by ICMA-RC and
agrees to the terms therein.
Loan repayment will begin as soon as practicable following the employee's presentment of the loan check for payment.
o Loan application through the Employer: 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 each partici-
pant's application,
The participant will be required to sign a promissory note evidencing the loan and a disclosure statement that includes
an amortization schedule prior to receiving a loan check. Loan checks will generally be issued on the next business day
following ICMA-RC's receipt of a complete loan application. The loan check, promissory note, disclosure statement and
truth-in-Iending rescission 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 ICMA-RC within 10 calendar days from the date
the check is issued.
IX. Security/Collateral
That portion of a participant's account balance that is equal to the amount of the loan is used as collateral for the loan. The col-
lateral amount may not exceed 50 percent of the participant's account balance at the time the loan is taken. Only the portion of rhe
account-balance that corresponds to the amount of the outstanding loan balance is used as collateral.
X. Acceleration [select one]
o All loans are due and payable in full upon separation from service.
ti All loans are due and payable when a participant receives a distribution of all of his/her account balance after separa-
tion 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 his/her account balance after separa-
tion 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,
XI. Reamortization
Any 'outstanding loan may be reamortized. Reamortization means changing the terms of a loan, such as length of repayment peri-
od, interest rate, and frequency of repayments. A loan may not be reamortized to extend the length of the loan repayment period to
more than five (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 specified 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 adminis-
trator, 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 administrator 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 year limit.
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ICMA-HC
XII. Refinancing existing loans
If a participant has one outstanding loan, that loan may be refinanced. If a participant has more than one outstanding loan, no
loans may be refinanced. Refinancing means concurrently repaying an existing loan and borrowing an additional amount through
a new loan. Refinancing includes any situation in which one loan replaces another loan and the term of the replacement loan does
not exceed the latest permissable term of the replaced loan.
In order to refinance an existing loan, a participant must request this in writing on an application approved by the plan administra-
tor. Such request must be made at a time when the participant is eligible to obtain a loan as defined by the employer in Section III
above. The amount of the additional loan amount requested for the purpose of refinancing is subject to the loan limits specified in
Section IV above,
Because a refinancing is considered a new loan, only active employees may refinance an outstanding loan.
XIII. Reduction of Loan
If a participant dies prior to full repayment of the outstanding loan(s), the outstanding loan balance(s) will be deducted from the
account prior to distribution to the beneficiary(ies). The unpaid loan amount is a taxable distribution and may be subject to early
withdrawal penalties. The participant's estate is responsible for taxes or penalties on the unpaid loan amount, if any, A beneficiary
is responsible for taxes due on the amount he or she receives. A Form 1099 will be issued to both the beneficiary and the estate for
these purposes.
XIV. Deemed Distribution
Loan repayments must be made in accordance with the plan document, plan loan guidelines, and as reflected in the promissory
note signed by the participant. If a scheduled payment is not paid within 30, 60, and/or 90 days of the due date, a notice will be
sent to both the employee and the employer.
A loan will be deemed distributed when a scheduled payment is still unpaid at the end of the calendar quarter following the calen-
dar quarter in which the payment was due. If the total amount of any delinquent payment is not received by ICMA-RC by the end
of the calendar quarter following the calendar quarter in which they payment was due, the loan is considered a taxable distribution,
and the principal balance, in addition to any accrued interest, is reported as a distribution to the IRS. However, no money is paid
in this distribution, because the participant already has the loan proceeds.
The loan is deemed distributed for tax purposes, but it is not an actual distribution and therefore remains an asset of the partici-
pant's account. Interest continues to accrue. The outstanding loan balance and accrued interest are reported on the participant's
account statement.
Repayment of a deemed distribution will not change or reverse the taxable event,
The loan continues to be outstanding, and to accrue interest, until it is repaid or offset using the participant's account balance. An
offset can occur only if the participant is eligible to receive a distribution from the plan as outlined in the plan document.
Participants are required to repay any outstanding loan which has been deemed distributed before they can be eligible for a new
loan. The deemed distribution and any interest accrued since the date it became a taxable event is taken into account when deter-
mining the maximum amount available for a new loan, New loans must be repaid through payroll deduction.
8
Loan Guidelines Agreement
16ft
The employer is obligated by federal regulation to comply with the loan guideline requirements applicable to participant loans, and
to ensure against deemed distribution by monitoring loan repayments, regardless of the method of repayment, and by advising em-
ployees if loans are in danger of being deemed distributed, The tax-qualified status or eligibility of the entire plan may be revoked
in cases of frequent repayment delinquency or deemed distribution.
XV. 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 and/or from the participant's loan repayments prior to crediting the repayment of principal
and interest to the participant's account. A schedule of fees applicable to this plan is specified in ICMA-RC's current publication of
Making Sound Investment Decisions: A Retirement Investment Guide.
XVI. 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
day
of
,20
EMPLOYER
L.. eo ~ E . C? 0-11 f" lf1C..
Title: U'/A/~ /J71fhVA- J..,pA
By:
Accepted: ICMA RETIREMENT CORPORATION
By:
Title:
Attest:
Attest:
9
16El
LOAN ADMINISTRATION AGREEMENT
FOR SEalON 457 DEFERRED
COMPENSATION PLANS
16f1
ICMA-RC 457 LOAN
ADMINISTRATION AGREEMENT
This Agreement is not required if you have l)only one 457 plan provider or 2)more than one plan provider each with
its own plan document and provisions unique to each provider. The Agreement only applies if you have adopted a
single 457 plan document under which ICMA-RC and one or more other provider(s) must operate. Please refer
to pages 5-6 of A Guide to Implementing a Loan Program for more details.
This Agreement shall serve as an Addendum to the Loan Guidelines established by the Employer identified below as
an Addendum to the Administrative Services Agreement (ASA) made by and between the ICMA Retirement Corpora-
tion (ICMA-RC) and the Employer.
The Employer currently sponsors a section 457 deferred compensation plan administered by two or more providers
(co-provider plan). In order to ensure the efficient administration of the loan program established by the Employer,
the Employer hereby agrees and declares that
(1) For purposes of issuing loans from the plan, that portion of the plan's assets administered by
ICMA-RC will be treated as though it were a separate and distinct plan.
(2) The Employer shall calculate the amount a participant may borrow from the ICMA-RC administered
portion of the plan. No loan amount may exceed the lesser of (a) the maximum loan amount specified
in Internal Revenue Code section 72 (p)(2) (A) or (b) 50% of the participant's ICMA-RC-administered
account balance.
(3) All loan repayments must be made to the participant's ICMA-RC-administered account for the life of
the loan.
Signature of Authorized Official
ICMA RETIREMENT CORPORATION
~~ C.)lJ~
Angela Montez
Assistant Secretary
Mail this Agreement and the completed 457 Plan Loan Guidelines to:
ICMA-RC
Attention: New Business Analyst
777 North Capitol Street, NE
Washington, DC 20002-4240