Loans can be obtained for active employees and retirees who are enrolled in a UK 403(b) or 457(b) retirement plan.
Employees may borrow up to 50% of the balance in their 403(b) or 457(b) account with Fidelity or up to 45% with TIAA-CREF ($50,000 maximum)
The minimum amount for a loan is $1,000.
The maximum loan period is five years. The IRS allows up to 10 years for a loan solely to purchase your primary residence. Documentation is required.
Each retirement carrier may have additional rules related to the type of investments involved or company policies.
Fees for loan administration charged by the retirement carrier, if applicable, may vary and are the responsibility of the employee.
Employees who default on their loan will be subject to taxation by the IRS for the entire amount of the loan and penalties, if they are under age 59½. In addition, future loans can not be obtained for seven years if you have defaulted on a previous retirement plan loan.
Hardship Withdrawals
Hardship withdrawals are available only through TIAA-CREF after a loan has been obtained first.
Funds available for hardship withdrawal are limited to amounts equal to 1) employee 5% contributions and 2) voluntary contributions from TIAA-CREF.
Distribution amounts cannot exceed the need documented. Payments can be "grossed-up" to accommodate the 20% federal tax withholding. No maximum hardship amount.
The IRS will impose a 10% penalty for early withdrawal if the employee is under age 59½.
Documentation of need is required for a hardship withdrawal and must be submitted to the Employee Benefits Office before the withdrawal is approved.
Hardship withdrawals are available under the IRS guidelines for:
Medical expenses for the employee, employee's spouse or dependents that exceed 7.5% of the Adjusted Gross Income;
Purchase of the employee's principal residence
Post secondary education for the next semester or quarter for the employee, spouse, or dependent.
Payments needed to prevent eviction or foreclosure.
