One of the many benefits provided by the Teachers’ Retirement System (TRS) and the Board of Education Retirement System (BERS) is the ability to borrow against your Qualified Pension Plan (QPP) and Tax-Deferred Annuity (TDA) accumulations.

Here are the two sources from which you can borrow money:

• If you are an in-service member (or on a leave of absence) in Tiers 3, 4 or 6, and you have at least one year of TRS or BERS membership service, you may borrow from your Qualified Pension Plan against your Member Contribution Accumulation Fund and against part of your Additional Member Contributions.
• In-service members and members who are on leaves of absence and who have participated in the TDA program for at least one year may borrow from their TDA accounts. Retired members who have TDA deferral status are also eligible.

The maximum amount you may borrow from your Qualified Pension Plan and your TDA is a total of $50,000 provided you have sufficient funds in your accounts.

Qualified Pension Plan loans and TDA loans have a lot in common. Funds are available within two weeks after you apply and, under normal circumstances, are not taxable. Both also have convenient repayment plans. The annual interest rate for a Qualified Pension Plan loan is 6%, and the interest rate for a TDA loan is 7%.

You may apply for loans from the secure section of the TRS website or call BERS at 929-305-3800.

How the loans differ

With a Qualified Pension Plan loan, you are actually borrowing against the city’s pension funds and you repay the city. Your personal account balance is not affected by the loan.

With a TDA loan, you borrow funds from your personal TDA account. Your TDA balance is drawn down when you receive the loan, and your payments are credited back to your TDA account.

For repayment, regular amounts are deducted from your paycheck or your pension check. These automatic deductions protect you from falling behind on payments.

Loans from your retirement funds are simple to obtain and are a private arrangement between you and TRS or BERS. These loans do not appear on credit reports. But complications arise if you go off payroll for any reason. In that event, you must send monthly checks to TRS or BERS, and you are responsible for remembering to do so.

Borrowing money is a serious financial decision. Be sure to compare the terms of TRS or BERS loans with other loans to understand all of the ramifications.

Brochures about Qualified Pension Plan and TDA loans are available. Download the TRS brochure from TRS website or request a BERS brochure by calling 929-305-3800.

This column is compiled by Tom Brown, David Kazansky and Victoria Lee, teacher-members of the NYC Teachers’ Retirement Board.