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 Elective Contributions and Rollover Balance or $50,000 in any calendar year.

You must have a balance of at least $5,000 in your account.  Employer Contributions will not count toward this minimum.

The Interest Rate charged on a loan through the Plan will be 1% above the Prime Rate as published by the Federal Reserve on the date of your application: http://www.federalreserve.gov/Releases/H15/update/.

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!

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. 

• A General Purpose Loan will be available with a repayment schedule of five (5) years.  This kind of loan may be taken for any reason. There is a $100 fee for this loan.
   

• The Primary Residence Loan will be available with a repayment schedule of ten (10) years.  This kind of loan must include specific paperwork showing the purchase agreement for a Primary Residence.  There is a $150 fee for this loan

Remember! Employer Contributions are not eligible for Loans from the Plan. 

Am I eligible for a loan from my IUE-CWA 401(k) Plan?
For those Participants whose Local Union and Employer have signed a new Memorandum of Agreement (June 2006 and later) Loans are now permitted from the 401(k) Plan. 

The IRS imposes strict regulations on how loans may work.  This is why each Local Union and Employer must sign new Memorandum of Agreements before those Participants will be eligible for Loans.  The new Agreements may be signed at any time, but no later than the next collective bargaining agreement date.  Notices of these requirements have been sent both to Local Unions and to Employers participating in the Plan. 

In the event the parties are unwilling or unable to reach an agreement regarding this new Memorandum of Agreement as a part of their new collective bargaining agreement, the IUE-CWA 401(k) Plan will consider that the parties have voluntarily ceased participation in the IUE-CWA 401(k) Plan effective upon the effective date of a subsequent collective bargaining agreement.  If you are currently in bargaining, please contact the Plan and we can provide a new MOA, as well as answer any questions that you may have regarding the repayment of loans.