New York administers eight public-sector retirement systems. Three are offered by the state and five by the city. Most of these retirement systems have six benefit tiers. Members should be conversant with their tier and the benefits they are accruing.

That said, a very popular benefit is loan availability. The maximum amount people can borrow is 75 percent of their accumulated contributions account. Some may borrow a maximum of 90 percent. Check with your retirement system. Payments are made by payroll deduction. Borrow only the needed amount, and make sure the loan's paid off before you retire.

With that said, many take out a loan in conjunction with retirement because they need to pay some bills, make a large purchase or simply build up their bank savings. Others decide it's best to roll the loan into an IRA. Regardless of the reason for taking the loan, one's pension will be reduced accordingly.

Fiduciary duty requires the retirement system to tell the member: 1) A loan taken at or near retirement is eligible to be rolled into an IRA. 2) If the loan consists of a taxable portion and a tax-free portion, the taxable portion may be rolled into a Traditional IRA, and the tax-free portion may be rolled into a Roth IRA. 3) You have the statutory right to execute a Direct Rollover of your loan. This means the retirement system will send the amount of the loan directly to the IRA custodian you designate.

Note 1. The statutory right to roll over loans taken at or near retirement was first codified by the Unemployment Compensation Amendments Act of 1992 (effective Jan. 1, 1993).

So it's shocking that members of the New York State and Local Retirement System are still being denied their right to roll over loans taken at or near retirement. For 28 years retiring members have been required to do one of two things: Receive an unreduced pension by leaving their accumulated contributions with the NYSLRS; or, receive a reduced pension by withdrawing 75 percent/90 percent of their accumulated contributions. Given the choice, how many NYSLRS retirees would have elected the rollover option?

Note 2. Distributions from IRAs established with rollover amounts from these eight retirement systems are exempt from the New York State personal income tax.

Mr. Frank is a fee-only Retirement Financial Planner and a retired city high school Teacher of Accounting. He can be reached by phone at (732) 536-9472, or via email at

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