If you take a loan against your NYSLRS contributions, you must repay the loan in five years. This timeframe is required by the Internal Revenue Service. If the loan is not repaid within five years, it defaults.
NYSLRS loans are paid back through payroll deductions, which are taken out of your paycheck by your employer. During the five-year period, we’ll periodically review your remaining loan balance. If your current payroll deduction amount won’t be enough to pay off your loan within the required timeframe, we’ll notify your employer to increase your payroll deduction. We do this to make sure you can repay your loan on time.
Generally, the increase of your payroll deduction will be small. Your increase could be more significant if, for example, you go on leave without pay and need to make up any missed payments.
Once you pay your loan in full, we’ll notify your employer to stop taking payroll deductions.
How You Can Adjust Payroll Deductions
You can sign in to your Retirement Online account or call our automated phone line to check your outstanding loan balance. Knowing your outstanding loan balance can help you determine how to adjust your payroll deductions if you want to pay off your loan sooner. Please visit our website for more information about repaying your NYSLRS loan.
How long does it usually take for a judgment for a QDRO to come out after it has been awarded?
For questions about a Domestic Relations Order, you or your attorney can email our Matrimonial Bureau at dro@osc.state.ny.us.
What happens if your retirement loan is not paid off when you retire?
If you retire with an outstanding NYSLRS loan, the amount of your pension payments will be reduced. The amount of the reduction depends on the amount of the loan and your age at retirement.
More information about pension reductions is available on the loan application for Tiers 3-6 and for Tiers 1 and 2.
In most cases, you will also need to report at least some portion of the loan balance as ordinary income (subject to federal income tax) to the Internal Revenue Service (IRS). You may also be subject to a tax penalty.
Under a recent change in the law, ERS members may repay their loan after retiring. If you choose to pay back your loan after you retire, you must pay back the full amount of the outstanding balance that was due when you retired in one lump-sum payment. Following your full repayment, your pension benefit will be increased from that point going forward, but it will not be adjusted retroactively back to your date of retirement.