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How do Loans from the IUE-CWA 401(k) Plan work? You may only have ONE outstanding Loan from the Plan at a time. The minimum loan amount is $1,000. The maximum amount of a loan from the Plan is: No more than 50% of your Account Balance or $50,000 in any calendar year. The Interest Rate charged on a loan through the Plan will be 1% above the bank prime loan rate as published by the Federal Reserve on the last business day of each calendar quarter (www.federalreserve.gov). Even though you are "paying yourself" the interest on a loan from your 401(k) Plan, you are repaying the loan and the interest back with AFTER-TAX money! So, this means that you will pay taxes twice on your loan and interest amount! The first time is when you repay your loan and interest - the second time is when you take the money from your account at retirement! Effective 12/3/10, all loan repayments will be made through a monthly billing to your mailing address and will not be made by payroll deduction. Remember! You must repay your loan even if you are on layoff or off work for any reason! If you default on your loan, you will pay taxes and penalties to the IRS even if you aren't working! Borrowing from your 401(k) Plan savings can lower your lifetime savings amounts, because when the money is not invested, your savings are not growing. Also, repaying the money and interest with AFTER-TAX money lowers your savings as well. The addition of the Loan Provision to the Plan also changes the Hardship Withdrawal Provision. The IRS requires that before a Participant can apply for a Hardship Withdrawal, all other loans and distributions must be utilized. Read and understand all the details in the IUE-CWA 401(k) Plan Summary Plan Description before deciding whether a loan from the Plan is right for you.
Two types of Loans will be offered under the 401(k) Plan.
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