Some plans allow you to borrow money from your NADART Investment Choice 401(k) account. (Check with your employer to see if loans are available in your plan.) If your plan allows you to borrow against a portion of your vested account balance, you may request up to two loans for any reason. However, when you take a loan, you must repay the loan before leaving the company or the IRS will consider it a distribution and impose an early withdrawal penalty.
How much can you borrow?
The minimum loan amount is $1,000. The maximum loan amount is the lesser of:
50% of your vested account balance, excluding the outstanding balance of all other loans under the plan, or
$50,000 reduced by your highest loan balance during the last 12 months.
Repayment
You may choose to repay the loan over 1 year, 2 years, 3 years, 4 years, or 59 months. However, the repayment frequency must equal your payroll frequency. You may repay the loan in full without penalty at any time before the end of the loan term.
Requesting a Loan
You can request a loan through PlanWeb after which NADART will produce a loan application. Read the application carefully to make sure if contains all the provisions you selected through PlanWeb. If the application is acceptable then you will need to obtain all necessary signatures and have your plan coordinator submit the application to NADART for processing.
Once NADART determines you are eligible to receive the loan distribution (if you are not eligible, you will be notified in writing), a promissory note will be sent to your plan coordinator. This details your repayment obligation and the consequences of default.
The loan check will not be issued until all applicable signatures are obtained and the promissory note returned to NADART via fax or mail. Once it is received by NADART, the loan distribution and repayment schedule will be released by the Friday following the next available check processing date.
Before the check is released to you, you must complete a new payroll deduction authorization card (PDF) to authorize loan repayments through payroll deduction. The withholding will continue until the loan is repaid in full. Once the loan has been paid in full, NADART will return the promissory note to your plan coordinator to be forwarded to you.
Loan Fees
NADART charges a $100 loan origination fee, which will automatically be added to the proceeds of the loan. An additional loan maintenance fee of $50 per year will be deducted in $12.50 quarterly increments from your account until the loan is paid in full.
If you work in the state of Florida, the Florida State Loan Origination Tax will be deducted from your account upon origination of your loan. The amount of tax deducted will equal 35 cents for each $100 borrowed.
Note: If you are a participant in an Investment Choice Plan that offers the Roth Contribution feature, your Roth Account Balance is not eligible to be distributed as part of a loan. However, this balance can be included when calculating the gross amount available for a loan. This can create a difference between the maximum loan available and the amount eligible for distribution.