Borrowing from retirement fund OK’d

FLINT TWP. — Non-union employees and elected officials can continue taking loans from their retirement funds, following passage of a resolution by the Township Board of Trustees.

Board action responded to a memo from controller Beth Takacs, which said the approval was needed since the Municipal Employees Retirement System (MERS) set new provisions after taking over administration of the Defined Contribution Retirement Plan from ICMA Retirement Corporation earlier this year. Employees were allowed to take loans under the old plan.

Implementation of MERS new loan procedures required township board approval before Nov. 1 in order for employees to continue borrowing from their retirement funds, Takacs memo stated. It applies only to fulltime non-union and elected officials participating in the MERS retirement plan. “We can no longer allow employees to take loans if you do not adopt these provisions,’’ Takacs said at the board meeting.

The new provisions stipulates that the loan request must be for a minimum of $1000 and maximum amount of 50 percent of vested balance up to $50,000, subject to the approval from the employer and MERS. Employees are allowed two loans at a time in a one-year period and five-year maximum loan period, No refinancing is allowed and they must pay a $150 one-time processing fee.

“The goal of these procedures is to continue to offer participants affordable loans, while continuing to help them save for their retirement in a responsible manner,’’ according to a summary of loan provisions from a MERS administrator.

The board approved the resolution five to two with trustees Belenda Parker and Barbara Vert opposing.

Parker asked why union employees were not included in the provision.

“Will they have the same opportunity?” Parker asked. “Why are we doing it for some and not for all?”

Takacs said that legalities prevented allowing union members to take loans from defined benefits.

Frank Kasle questioned whether the loans could be taken for any purpose but said he would agree to the new loan provisions since it that has been allowed in the past.

“I would point out that 401Ks and other benefits are supposed to be for retirement,’’ he said. “If employees take loans while still working, it somehow defeats the purpose.’’

He said he hoped employees would think twice before exercising the loan option. He said he could see the reason for borrowing if there is a financial hardship but not to pay for a vacation.

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