4.38.406 Loans to participants.
If a financial emergency arises from such causes as sickness of a participant or their family, layoff, divorce, or dissolution of marriage, need to provide adequate housing, need to provide for education of children or dependents, or such other financial need deemed acceptable by the committee, the committee, in its sole discretion and upon written application of such participant, may make a loan or loans to such participant in an amount aggregating under this plan or any other plan (related plan) maintained by the employer not in excess of the lesser of (1) $50,000 reduced by the excess (if any) of the highest outstanding balance of loans during the one year period ending on the day before the loan is made, over the outstanding balance of loans from the plan on the date the loan is made, or (2) 50% of the participant’s vested account, provided that such loans:
A. Are available to all participants on a reasonably equivalent basis, and in the same percentage of their vested balances;
B. Are not made available to highly compensated employees, officers, or shareholders in an amount greater than the amount made available to other employees;
C. Are adequately secured by up to 50% of a participant’s vested account balance;
D. Will in all events be due and payable in substantially level payments made not less frequently than quarterly in five years or less (unless the loan is used to acquire a dwelling which is used or to be used within a reasonable time as the principal residence of the participant);
E. Are evidenced by the borrowing participant’s promissory note (including, in the case of a married participant, spousal consent to such loan) for a fixed term bearing interest at a rate commensurate with the prevailing interest rate charged on similar commercial loans by persons in the business of lending money;
F. If a valid consent has been obtained in accordance with subsection G. below, then, notwithstanding any other provision of this plan, upon distribution of a participant’s account, all notes are due and payable, and total amounts unpaid, including principal and interest, will be deducted from the amount distributed, but only if such reduction is used as a repayment of the loan. If less than 100% of the participant’s vested account is payable to the surviving spouse, then the account shall be adjusted by first reducing the vested account by the amount of the security used as repayment of the loan, and then determining the benefit payable to the surviving spouse;
G. Notwithstanding the above, no portion of a participant’s account may be used as security for a loan unless, at the time the security interest is entered into, the participant’s spouse (if any) consents to the use of the participant’s account as security. Such consent must:
1. Acknowledge the effect of the consent; and
2. Be signed within the 90 day period ending on the date on which the loan is to be so secured; and
3. Be witnessed by a plan representative or notary public.
Such consent shall thereafter be binding with respect to the consenting spouse or any subsequent spouse with respect to that loan.
A new consent shall be required if the account is used for renegotiation, extension or renewal, or other revision for the loan;
H. Shall be made under specific procedures established by the administrative committee. Such procedures shall include the basis on which loans will be approved or denied; the limitations, if any, on the types and amounts of loans offered; and the events constituting a default and the steps that will be taken to preserve plan assets in the event of such default.
Notwithstanding subsection D. above, in no event, except as may otherwise be required by ERISA, may the interest rate charged for a loan exceed any limit established under the applicable state usury law. Such loan shall be treated as an earmarked investment of the borrowing participant who shall be entitled to all earnings or losses thereon. (Ord. 6748-NS § 1, 2003)