Or. Admin. Code § 459-050-0077 - Loan Program
(1) Definitions.
For purposes of this rule:
(a) "Cure period"
is that time from when a default occurs until the end of the quarter following
the quarter in which the default occurred.
(b) "Deferred Compensation Account" means the
account described in OAR
459-050-0001, but does not
include any amount in the Self-Directed Brokerage Option.
(c) "Designated Roth Account" means the
account described in OAR
459-050-0001, but does not
include any amount in the Self-Directed Brokerage Option.
(d) "Loan balance" means the outstanding
principal and accrued interest due on the loan.
(e) "Participant Loan" means a loan that
affects the Deferred Compensation Account, Designated Roth Account, or a
combination of both, of a participant.
(f) "Promissory note" means the agreement of
loan terms between the Program and a participant.
(g) "Third Party Administrator (TPA)" means
the entity providing record keeping and administrative services to the
Program.
(2) Eligibility
for loan. Participants who are currently employed by a Plan Sponsor that has
agreed to participate in a Participant Loan program are eligible for a
Participant Loan. Retired participants, participants separated from employment,
designated beneficiaries, and alternate payees are not eligible.
(3) Application for loan: A participant must
apply for a loan and meet the requirements set forth in this rule.
(a) Once a loan is approved, a participant
must execute a promissory note in the form prescribed by the Program.
(b) If a participant is deceased before the
disbursement of the proceeds of a loan, the participant's loan application
shall be void as of the date of death.
(4) Loan Types:
(a) General purpose loan - a loan not taken
for the purpose of acquiring a principal residence. General purpose loans must
be repaid over a non-renewable repayment period of up to five years.
(b) Residential loan - a loan made for the
purpose of acquiring a principal residence, which is, or within a reasonable
time shall be, the principal residence of the participant. Residential loans
must be repaid over a non-renewable repayment period of up to 15 years. A
refinancing does not qualify as a residential loan. However, a loan from the
Program that will be used to repay a loan from a third party will qualify as a
residential loan if the loan would qualify as a residential loan without regard
to the loan from the third party.
(5) Interest Rate: The rate of interest for a
loan shall be fixed at one percent (1%) above the prime interest rate as
published by the Wall Street Journal on the last business day of the month
before the month in which the loan is requested.
(6) Loan Fees: A loan fee of $75.00 shall be
assessed when the loan is approved. The fee shall be deducted from a
participant's deferred compensation account on a pro-rata basis from existing
investments.
(7) Loan Limitations:
(a) The maximum loan amount is the lesser of:
(A) $50,000; or
(B) One-half of the combined value of the
participant's Deferred Compensation Account and the Designated Roth Account on
the date the loan is made.
(b) The minimum loan amount is
$1,000.
(c) A participant may only
have one outstanding loan.
(d) A
participant who has received a loan may not apply for another loan until 12
months from the date the previous loan was paid in full.
(8) Source of Loan: The loan amount will be
deducted from a participant's Deferred Compensation Account, Designated Roth
Account, or a combination of both.
(a) Loan
amounts will be deducted first from the Deferred Compensation
Account.
(b) Loan amounts will be
deducted pro-rata from existing investments in a participant's
account(s).
(c) A participant may
not transfer a loan to or from another retirement or deferred compensation
plan.
(9) Repayment
Terms: The loan amount will be amortized over the repayment period of the loan
with interest compounded daily to calculate a level payment for the duration of
the loan.
(a) Loan payments must be made by
payroll deduction. To receive a loan from the Program a participant must enter
into a payroll deduction agreement. For the purposes of this rule, a promissory
note or other document that includes the payroll deduction amount and is signed
by a participant as a requirement to obtain a loan may be a payroll deduction
agreement. Except as provided in this rule, a participant may not submit a loan
payment directly to the Program or the Third Party Administrator.
(b) A participant is responsible for loan
repayment even if the employer fails to deduct or submit payments as directed
under the payroll deduction agreement. To avoid defaulting on a loan by reason
of the employer's failure to deduct or submit a payment a participant may
submit a loan payment by sending a money order or certified check to the Third
Party Administrator.
(c) A
participant may repay the loan balance in a single payment at any time before
the date the final loan payment is due.
(d) Partial payment of a scheduled payment
and partial prepayment or advance payment of future payments may not be
permitted.
(e) Loan payments will
be allocated in a participant's account(s) in the same manner as the
participant's current contribution allocation. If, for any reason, the
allocation is not known, the payment will be allocated to the Stable Value
Option.
(f) Any overpayment will be
refunded to the participant.
(10) Leave of Absence. Terms of outstanding
loans are not subject to revision except as provided in this section.
(a) Loan payments may be suspended up to one
year during an authorized leave of absence if a participant's pay from the
employer does not at least equal the payment amount.
(A) Interest on a loan continues to accrue
during a leave of absence.
(B) A
participant must immediately resume payments by payroll deduction upon return
to work.
(C) The loan balance will
be re-amortized upon the participant's return to work to be repaid within the
remaining loan repayment period.
(D) Loan payments may be revised to extend
the remaining loan repayment period to the maximum period allowed in the event
the loan originally had a term shorter than the maximum period allowed under
section (4) of this rule.
(E) If a
participant is on a leave of absence that exceeds one year, the loan shall be
in default unless repayment begins one year from the participant's last date
worked or the date the final payment is due under the promissory note,
whichever is earlier.
(b) Military Leave. Loan payments for
participants on military leave may be suspended for the period of military
service.
(A) A leave of absence for military
service longer than one year will not cause a loan to be in default.
(B) Loan payments by payroll deduction must
resume upon the participant's return to work.
(C) The original repayment period of a loan
will be extended for the period of military service or to the maximum repayment
period allowed for that type of loan, whichever is greater.
(D) Interest on a loan continues to accrue
during a leave of absence for military service. If the interest rate on the
loan is greater than 6%, then under the provisions of the Service members Civil
Relief Act of 2003, the rate shall be reduced to 6% during the period of
military service.
(E) The loan
balance will be re-amortized upon the participant's return to work to be repaid
within the remaining loan repayment period as determined under paragraph (C) of
this subsection.
(c) A
participant on an authorized leave of absence or military leave may submit loan
payments by sending a money order or certified check to the Third Party
Administrator.
(11) Tax
Reporting.
(a) The loan balance of a general
purpose loan will be reported as a taxable distribution to the participant on
the earlier of the last day of the loan repayment period, as adjusted under
paragraphs (10)(a)(D) or (10)(b)(C) of this rule, if applicable, or if the loan
is in default, the last day of the cure period.
(b) The loan balance of a residential loan
will be reported as a taxable distribution to the participant on the earlier of
the last day of the loan repayment period, as adjusted under paragraphs
(10)(a)(D) or (10)(b)(C) of this rule, if applicable, or if the loan is in
default, the last day of the cure period.
(c) If a participant dies before the loan
balance being repaid, and the participant's beneficiary does not repay the loan
balance in a single payment within 90 days of the participant's death, the loan
balance will be reported as a taxable distribution to the estate of the
participant.
(d) If a participant
is eligible to receive a distribution under the Program, the reporting of a
loan balance as a taxable distribution under this section will cancel the loan
at the time the taxable distribution is reported. A canceled loan is a
distribution and is no longer outstanding in a participant's account.
(e) If a participant is not eligible to
receive a distribution under the Program, a loan balance reported as a taxable
distribution under this section will be a deemed distribution for tax reporting
purposes. A loan deemed distributed may not be canceled until the loan balance
is repaid or the participant becomes eligible to receive a distribution. The
loan balance will remain outstanding in the participant's account and will
continue to accrue interest until repaid or canceled.
(12) Default.
(a) A loan is in default if a payment is not
paid as scheduled or under any of the provisions set forth in this rule, the
promissory note, or any related loan agreement.
(b) A loan is in default if the participant
separates from employment with the plan sponsor that administers the loan
payment payroll deductions.
(c) If
a participant with a loan in default resumes loan payments by payroll deduction
before the end of the cure period, the default will be cured. The participant
must pay any missed payments and accrued interest before the end of the loan
repayment period.
(d) Except as
provided in subsection (c) of this section, if the participant does not cure a
default by repaying the loan balance before the end of the cure period, the
loan balance will be reported as a taxable distribution to the participant as
provided in section (11) of this rule.
(13) Notwithstanding any other sections of
this rule, a participant who self-certifies through a process provided by the
Deferred Compensation Program as a "qualified individual" as that term is
defined in the Coronavirus Aid, Relief, and Economic Security Act of 2020, will
have any repayment due date between March 27 and December 31, 2020 delayed for
one year.
(a) A qualified individual means an
individual:
(A) Who is diagnosed with the
virus SARS-CoV-2 or with coronavirus disease 2019 (COVID-19) by a test approved
by the Centers for Disease Control and Prevention;
(B) Whose spouse or dependent (as defined in
section 152 of the Internal Revenue Code
of 1986) is diagnosed with such virus or disease by such a test; or
(C) Who experiences adverse financial
consequences as a result of being quarantined, being furloughed or laid off or
having work hours reduced due to such virus or disease, being unable to work
due to lack of child care due to such virus or disease, closing or reducing
hours of a business owned or operated by the individual due to such virus or
disease, or other factors as determined by the Secretary of the Treasury (or
the Secretary's delegate).
(b) Interest will continue to accrue on the
outstanding balance of the loan during the period of repayment delay.
Notes
Statutory/Other Authority: ORS 243.470
Statutes/Other Implemented: ORS
243.401-243.507 &
Pub. L. No.
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