PARTICIPANT LOANS
  Based on requests from the membership, the Board of Trustees is very pleased to announce the implementation of loans from your Supplemental (401k) Plan effective September 1, 2010!
 

Click the appropriate link below to go directly to your area of interest:

 
 
Taking a Loan from your Supplemental (401k)
Think Before You Act
 

Many people consider retirement plan loans an easy way to access money they’ve saved.  In fact, taking a loan from your retirement plan is often a simple and inexpensive process. But doing so can put your future savings in jeopardy. Before taking a loan, be aware of the pitfalls.

How Loans Work:
You may borrow up to half your vested balance, up to $50,000. The loan must be paid back, with interest, over five years. Loan payments are deducted automatically from your bank account.

The Pros:
What makes them attractive is that while you do pay interest on the loan, the rate is relatively low, and you actually pay the interest to yourself. It’s almost like adding a little boost to your savings. But, at the same time, it’s possible you could be earning more from your investments than the interest you’re paying. That’s what they call a lost opportunity. Having loan payments automatically deducted from your bank account makes repayment simple, but it also adds another bill to pay each month. If this additional bill causes you to reduce the contributions you’re making to your retirement account, you’ll be hitting your future savings with a double whammy.

Obtaining a loan from your retirement plan is usually quick and convenient. There are no credit checks or applications — often a simple form or phone call, or even a few clicks online, will do the trick.

The Cons:
There are serious potential consequences to consider before taking a loan. First, when you remove retirement savings from your account, you’re taking away its ability to compound. It’s exactly this compounding effect that makes tax-deferred saving so attractive in the first place. Reducing your compounding potential can have a significant impact on your savings in the long run.

In addition, loan fees are taken directly from your account, further reducing its potential to grow.  The money you use to repay the loan is taxed twice. Loan repayments are paid back to the plan after tax through auto-payment from your bank account and join the pre-tax money already in the plan. The money you used to repay the loan will be taxed again upon withdrawal from a traditional retirement plan account.

Failure to repay the loan can have financial consequences, too. You will owe income taxes as if you had taken a distribution from your plan account. And you’ll pay a penalty if you’re younger than age 59½ because your defaulted loan will be considered an early withdrawal.

Modeling a Loan:
To model a loan that fits your needs, log on to The Standard’s Personal Savings Center website at www.retirement.standard.com to model various loans and calculate your loan payments to see if taking one makes sense for you.

Loan Policy:
To view a copy of the Trust's Loan Policy, click here.

 
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  Frequently Asked Questions on Loans
 
FAQs
How do I know if I'm eligible for a loan?
How much can I borrow?
What is the length of the loan?
How do I repay my loan?
What happens if I miss a payment?
What is the interest rate?
What are the loan fees?
How do I request a loan?
 
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  How do I know if I'm eligible for a loan?
  To be eligible for a loan, your regular plan account must have a balance of a least $2000. You do not need to be actively employed to obtain a loan. One loan is permitted at any time. You must not have defaulted on a loan in the preceding 36 months.
 
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  How much can I borrow?
 

You can take a loan that is up to 50% of your account balance.  The minimum size of a loan is $1,000 and the maximum is $50,000.  For example, if you have an account balance of $2,000 you may take a loan of $1,000. If you have an account balance of $125,000, you may take a loan up to $50,000.

 
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  What is the length of the loan?
 

The length of the loan may be up to a maximum of 5 years. You can pay off your loan at any time. 

 
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  How do I repay my loan?
  Payments will be automatically deducted from your bank account on a monthly basis (via AutoPay) on or about the 10th of each month.  These payments are not part of any payroll deduction, but in addition to. Autopay forms will be provided to you with your initial loan paperwork. Should you change your banking information during the course of your loan, you will need to complete a new AutoPay form and submit it to the Trust Office no later than the 1st day of the month of the month your banking information changes.
 
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  What happens if I miss a payment?
 

After 90 days your loan will default and be considered a distribution. You will owe income taxes as if you had taken a distribution from your retirement account. You’ll also pay a penalty if you’re younger than age 59½ because your defaulted loan will be considered an early withdrawal.

 
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  What is the interest rate?
  It is the Prime Rate reported in the Wall Street Journal plus 1%. This interest rate is adjusted quarterly.
 
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  What are the loan fees?
 

It will cost $165 to initiate a loan and $15 a quarter to maintain the loan.  These fees will be deducted from your account.

 
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  How do I request a loan?
 

You may request a loan online.   A personal identification number (PIN) is required. If you do not have your PIN, you may request one by calling The Standard Insurance at (971) 321-7526 or (800) 858-5420. Once online with The Standard, you will utilize the "Modeling a Loan" tool to determine which loan that will suit your needs. Then, click to request the loan.  Within 7 business days, your loan paperwork will be sent to you.  If you would like it emailed rather than sent through the USPS, call the Trust office.  Once you and your spouse sign and provide the appropriate forms back to the Trust office, your check will be mailed to you within 2 business days. 

 
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