The State University of New York
MEMORANDUM
TO: Members of the Board of Trustees March 16, 2004
FROM: Robert L. King
SUBJECT: Optional Retirement Program Loan Policy
I recommend that the Board of Trustees adopt the following resolution:
Whereas Resolution 90-257, adopted December 20, 1990, Resolution 91-75, adopted May 23, 1991, and Resolution 2003-93, adopted October 28, 2003, permit participants of the University's Optional Retirement Program to make cash withdrawals under specific circumstances; and
Whereas, a review of this policy reveals that it fails to meet the needs of some State University employees as to post-1990 accumulations for which cash withdrawals are not available under Internal Revenue Service guidelines; and
Whereas, the current Optional Retirement Program fails to provide State University employees with comparability of peer institutions, which was a major objective in establishing the Optional Retirement Program in 1964; and
Whereas, in order to continue to be able to recruit and retain faculty and staff, and in order to provide employees with the fiscal means to respond to catastrophic events, health crises, and other circumstances that create financial hardship, it is necessary to add a loan feature to the existing Optional Retirement Program; now, therefore, be it
Resolved that a loan feature shall be added to the cash withdrawal policy, which permits participants of the Optional Retirement Program to borrow up to fifty per cent (50%) of the accumulated value of their contracts under the following circumstances:
1. Participants may take one loan per carrier within a twelve-month period.
2. All loans are subject to IRS regulations, which currently allow a loan balance of no more than fifty thousand dollars ($50,000.00) from all pension and tax-deferred annuity plans combined.
3. Loans are subject to rules promulgated by ORP carriers in respect to matters such as funds from which loans may be made, percentage of accumulated value that may be borrowed, if less than 50%, and minimum balances required.
Resolved that the Chancellor, or designee, be, and hereby is authorized to promulgate guidelines to implement the provisions of this Resolution.
BACKGROUND
The purpose of the Resolution is to add a loan feature to the State University's Optional Retirement Program to make the State University more competitive with other higher education institutions.
The ORP was amended in October 2003 to allow for cash withdrawals prior to age 56 and without spousal consent. However, only pre-1990 funds are eligible for withdrawal under the cash withdrawal policy. Thus, the addition of a loan feature to the Optional Retirement Program allows more employees access to their funds.
In addition, the loan feature also allows for comparability with ERS and TRS, both of which allow one loan per twelve month period, up to seventy-five percent (75%) of employee contributions plus interest, or $50,000.00, if less.
The intent of the ORP, authorized by statute in 1964, was to make SUNY competitive with other universities by offering comparable, portable retirement programs. The resolution facilitates that intent.
O:\Resolutions\March 2004\ORP Loan Policy.doc