V TA 401(a) Money Purchase Plan Loan/Refinance Application Packet This booklet contains the 401(a) Loan/Refinance Form two VTA has chosen to make loans available from your section 401(a) money purchase plan, administered by the ICMA Retirement Corpora- tion (ICMA-RC). The loan provision is a valuable feature, giving you the opportunity to borrow from your account balance and repay the loan through Automated Clearing House (ACH) debit. The loan is actually an investment of a portion of your account balance in a promissory note which you will sign upon receiving the loan funds. All loans bear interest that you pay and is credited to your account. The amount you receive as a loan is not treated as a taxable plan distribution unless you default on the loan. Steps to Follow 1. Obtain Loan Guidelines from VTA. The Loan Guidelines contain the specific provisions adopted by VTA relating to permissible loans, such as: Eligibility. Loans are available to active employees who are in paid status at the time of the loan application. If, at the time of the loan application you are in a paid status (i.e., vacation, sick leave), but are not actively working, you must indicate your intention of returning to active work with VTA in order to be eligible. If you are actively working, you must indicate your intention to continue working at VTA. Loans are available for the following reasons only: (1) Purchase of a participant’s principal place of residence. (Loans are not available for refinancing or foreclosure.) (2) College Tuition and Fees (Excludes books and living costs.) (3) Unreimbursed medical expenses. Loan Frequency. One loan per calendar year is permitted, provided all previous loans have been repaid in full. Loan Amount. The minimum permitted loan amount is $1,000, and you must have at least $2,000 in your account at the time. The maximum may not exceed the lesser of 50% of your account balance or $50,000. A worksheet for calculat- ing this amount is included on the last page of this brochure. Length of Loan. Loans must be repaid in substantially equal monthly installments of principal and interest over a period that does not exceed five years. The only exception is a longer repayment period (up to 15 years) for a loan used to acquire a principal residence. Loan Repayment Process. You begin repaying your loan as soon as administratively feasible through Automated Clearing House (ACH) debit. You may continue to repay the loan while on leave of absence, or you may complete a Request for Loan Repayment Suspension Form. Your loan repayment is allocated according to your most recent election of investment option(s). If your account has insufficient funds to make the entire payment, or to make any payment at all, the balance of the payment must be paid by certified bank check to ICMA-RC if you do not request a loan suspension. You may pay all or a portion of the principal and interest obligation early without penalty or additional fee. Extra payments are applied forward to the principal and interest breakdown on the original repayment schedule, unless the original payment is for the balance due. Extra payments must be in increments of $1,000, unless the additional payment is for the entire principal balance due. Loan Interest Rate. The loan interest rates are set for regular loans at the prime rate (the often-quoted rate that banks charge their best customers) plus 0.5%, and for principal residence loans at the FHA/VA rate. The method for setting these rates is established in the Loan Guidelines. Loan interest rates are locked in at the time of approval and remain fixed throughout the life of the loan. 2. Determine whether the amount you wish to borrow is within federal tax code requirements. You may calculate the maximum amount available to you using the Maximum Loan Worksheet on page four. Your requested loan amount is subject to downward adjustment without notice due to market fluctuation between the time of application and the time the loan is made. three 3. Complete the attached application form. 401(a) Loan/Refinance Application Form. This form is used to apply for a new loan or to refinance an existing loan. You may apply for a new loan for a qualifying reason if you have no loans outstanding. Refinancing is available to participants who have a non-residential loan. You may not refinance a loan for a primary residence, although you may reamortize it. In refinancing a loan, you are not permitted to extend the loan repayment period beyond the length of the payment period permitted for the initial loan. 4. Submit a completed form to your employer. You must complete and sign the form according to the instructions provided and submit it to VTA Deferred Compensation staff for approval. PLEASE DO NOT SUBMIT YOUR APPLICATION DIRECTLY TO ICMA-RC AS THIS WILL DELAY PROCESSING. VTA will review and approve the application. If your application is denied, VTA will provide the denial in writing. If approved, VTA will send the completed, approved application to ICMA-RC. 5. Receive loan documents and check from ICMA-RC through your employer. ICMA-RC typically sends out loan documents and checks two business days after receipt of complete and approved applications received through 12 noon Eastern Time. 6. Begin loan repayments. Your loan repayments will begin in accordance with the Amortization Schedule provided to you. Important Additional Information How much will I be charged for the loan? You will be charged a one-time, nonrefundable $50 fee, which will be deducted from your account when your loan request is processed. In addition, you will be charged an annual maintenance fee of $35 which will be deducted from your account (on the first day of the quarter containing the anniversary of the loan issuance) each year the loan is outstanding. What happens if I do not have sufficient funds with which to make my payment? Contact VTA Deferred Compensation staff regarding a loan suspension. What happens if I die before the loan is paid off? If you die prior to full repayment of your outstanding loan(s), the outstanding loan balance will be deducted from your account prior to distribution to your beneficiary(ies). The unpaid loan amount is a taxable distribution. Your estate is responsible for taxes on the unpaid loan amount, if any. Your beneficiary is responsible for taxes due on the amount he/she actually receives. A Form W-2 will be issued to your estate and a Form 1099 will be issued to your beneficiary for these purposes. What happens if I separate from service before my loan is paid off? Loans are due and payable when you separate from service. If not repaid in full, the outstanding loan balance will default unless paid off at separation. Such a default of your loan is considered a taxable distribution. See VTA Loan Guidelines for further information regarding loan suspensions and defaults. My loan is for a principal residence purchase. Can I deduct the interest on my federal tax return? While ICMA-RC does not provide tax advice, you should be aware that the instructions for completion of Schedule A, Form 1040 require that a condition of deductibility of home mortgage interest is that the loan is secured by the property. The security of your section 401(a) money purchase plan loan for a residence is your account balance, rather than the property itself. The actual amount you may borrow will be calculated using your account balance on the day the loan was made. four Maximum Loan Amount Worksheet (Required under the Internal Revenue Code) To estimate the maximum amount of a loan for which you may be eligible, calculate each step and select the lesser of the total from Step 1 or Step 2. If you have had no outstanding 457 or 401 plan loans in the last 12 months, you may enter $50,000 as the total in Step 1 and proceed to Step 2. Step 1. ___________ A. Enter your highest outstanding loan balance during the previous 12 months from 457 and 401 plan loans. [See your Loan Amortization Schedule(s)] (__________) B. Enter your current outstanding 457 or 401 plan loan balance(s). ___________ C. Subtract Line B from Line A. $50,000 D. (__________) E. Enter the amount from Line C. ___________ F. Subtract Line E from Line D. (__________) G. Enter your current outstanding loan balance(s). Step 1 Total ___________ Subtract Line G from Line F. Step 2. ___________ H. Enter 50 percent of the present value of your total account balance in the 457 plan including any outstanding loan balance. (__________) I. Enter your current outstanding 457 or 401 plan loan balance(s). Step 2 Total ___________ Subtract Line I from Line H. How is my ACH debit for loan repayment treated for tax purposes? Your ACH debit for loan repayments will be made on an after-tax basis. At the time that funds were transferred from your account to the investment in the Promissory Note, no taxable income was reported. When loan repayments are made, the repayments are credited back to your account. Because the amounts credited replace amounts already identified as to taxability, the repayment is made on an after-tax basis. A second tax deduction for replacing the funds, which will retain their pre-tax status, would amount to the same funds in the account having resulted in a tax deferral twice. How does this appear on my statement? Your quarterly statements will include a loan summary report, detailing the crediting of repayments of principal and interest to your account and presenting the outstanding loan balance amount. Whom can I call for assistance? Assistance is available concerning loan interest rates and monthly repayments, which depend on the reason for the loan, the amount you borrow and the number of years you select to repay it. Contact ICMA-RC’s Investor Services staff between 8:30 a.m. and 9:00 p.m. Eastern Time. Please call the toll-free VantageLine 1-800-669-7400 and request that you be connected to Investor Services. Para asistencia en Español llame al 1-800-669-8216. VTA 401(a) LOAN/REFINANCE APPLICATION FORM 1 Participant Information • Use this form to apply for a new loan or to refinance an existing loan. • Please read the instructions on the reverse side of this form before completing form. • Please print legibly in blue or black ink. • Please keep a copy of your completed application for your records. 2 New Loan Information A. Loan Amount Requested $ ____________________ OR ❐ Maximum Dollar Amount Available B. Loan Term Requested: ______________ (specify number of MONTHS per instructions on back of form) C. Primary Residence Loan ❐ Yes (Attach evidence of intent to purchase - see instructions on back of form) ❐ No D. Purpose of Loan _____________________________________________________________________________ 4 Loan Refinance Information I hereby apply for a loan, subject to and in accordance with the terms and provisions of VTA’s plan. I understand that the loan will be subject to a loan fee being deducted from my account balance. I have chosen automatic debit to my bank account via ACH to repay my loan. I hereby authorize the VantageTrust Company (hereinafter called the “Trust”) to debit the above referenced account for my regular loan repayments beginning as soon as possible. This authorization agreement is to remain in full force and effect until my loan has been paid off. If a change in bank account information occurs, I understand that my instructions must be made in such time and in such manner as to afford the Trust and depository a reasonable opportunity to act on it. This authorization agreement may also be terminated by the Trust. I have read the “Important Loan Notice” and understand the consequences of delinquent payments. I understand the tax implications, as well as the impact on my retirement account, in the event of loan default and/or deemed distribution. I also understand that any amortization schedule or loan data received prior to receipt of the actual loan documents was for illustrative purposes only. I understand that my signature on the loan check will constitute acknowledgement that I have received and read the loan materials and agree to the terms therein. As required by law and under penalty of perjury, I certify that the Social Security Number (Taxpayer Identification Number) I provided is correct. ____________________________________________________________ ___________________________________ Participant Signature Date 5 Participant Signature A. Loan Amount Requested: $ ______________________ (specify additional loan amount per instructions on back of form) OR ❐ Maximum Dollar Amount Available B. Loan Term Requested (specify remaining number of MONTHS per instructions on back) ____________________________ C. Purpose of Loan _________________________________________________________________________ 1 0 6 0 7 1 ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ Mailing Address: ______________________________________________________________________________ City: __________________________________________ State: ___ ___ Zip Code: ___ ___ ___ ___ ___ Employer Plan Number Daytime Phone Number Name of Participant Last First M.I. ___ ___ ___ ___ ___ ___ ___ ___ ___ - ___ ___ - ___ ___ ___ ___ (___ ___ ___) ___ ___ ___ - ___ ___ ___ ___ Area Code Do you intend to continue working for VTA? ❏ Yes ❐ No Social Security Number Loan Selection: ❐ New Loan (Complete Parts 2, 3, and 5, if applicable) ❐ Loan Refinance (Complete Parts 3, 4, and 5, if applicable) Marital Status Married Single ❐ ❐ ICMA Retirement Corporation • P.O. Box 96220 • Washington, DC 20090-6220 • Toll Free 1-800-669-7400 • Fax: 1-202-962-4601 • En Español llame al 1-800-669-8216 • wwww.icmarc.org PLEASE KEEP A COPY OF YOUR COMPLETED APPLICATION FOR YOUR RECORDS 6 Authorized Signature ____________________________________________________________ ___________________________________ Employer Approval Signature Date ____________________________________________________________ __________________________ _________________________ Employer Contact Name (please print) Phone Fax 3 Bank Account Information Please provide the following bank information. It is recommended that you also contact your bank to verify this information. Any errors or omissions may result in a delay in properly applying repayments to your loan. Financial Institution's Routing Number Financial Institution's Telephone Number ___ ___ ___ ___ ___ ___ ___ ___ ___ (___ ___ ___) - ___ ___ ___ - ___ ___ ___ ___ Type of Depositor Account ❏ Checking ❏ Savings Name on Depositor’s Account: __________________________________________________________________ Depositor Account Number: ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ ___ Name of Financial Institution __________________________________________________________________________ INSTRUCTIONS 1. Participant Information You must currently be an active employee in paid status to request a new loan or refinance an existing loan. If, at the time of the loan application you are in a paid status (i.e., vacation, sick leave) but are not actively working, you must indicate your intention of returning to active work with VTA in order to be eligible. If you are actively working, you must indicate your intention to continue working at VTA. Please complete all participant information to avoid a delay in processing. Select either a new loan or loan refinance by checking the appropri- ate box. Availability is subject to the frequency restrictions stated in the Loan Guidelines. 2. New Loan Information Complete this section to request a new loan. The loan amount requested cannot exceed the dollar amount restrictions contained in the Loan Guidelines. The amount you actually receive may be adjusted due to changes in your account balance on the day the loan is made. The new loan term requested is the number of months over which you wish to repay this loan. To assist you: 12 months = 1 year 60 months = 5 years 24 months = 2 years 120 months = 10 years 36 months = 3 years 180 months = 15 years 48 months = 4 years The maximum allowable term for a nonresidential loan is five years and the maximum allowable term for a primary resi- dence loan may not exceed 15 years. ICMA-RC will convert the terms of your loan to the number of required monthly payments. A primary residence loan is allowed only for the purchase of a primary residence. Proof of intent to purchase a primary residence must be attached to the loan application. Proof of intent may include a contract to buy/sell real estate, including signatures of BOTH buyer and seller. For non-residential loans, proof may include the amount of the unreimbursed medical or dental expenses, or a bill for tuition and fees. 3. Bank Account Information Please attach a voided check or withdrawal slip to this form. • Be sure your current address is shown. • Financial Institution’s Routing Number: Please call your bank or financial institution to verify the number. It should be the same as the numbers provided in the lower left corner of your check or withdrawal slip. • Depositor Account Number: This is your Bank or Financial Institution Account Number. 4. Loan Refinance and Reamortization Information Complete Section 4 of this application if you wish to borrow an additional amount by refinancing your loan. The amount requested is the additional loan amount desired. The reason for borrowing more money must be one that qualifies under VTA Loan Guidelines. A loan for a primary residence may be reamortized, but not refinanced. Use the 401(a) Reamortization Form if you are not requesting an additional loan amount. A Loan Reamortization may allow you to lower your interest rate, if current rates are lower than your current Deferred Compensation loan, or to extend the length of the loan to the latest date allowed for that type of loan. The loan term requested is the number of months over which you wish to repay the loan. This may not exceed the maximum allowable term according to VTA’s Loan Guidelines. For example, you want to refinance a two-year, nonresidential loan you were issued on January 1, 2001. You may extend the loan term repayment period, but not beyond January 1, 2006, the maximum allowable term of the original loan. Special rules may apply to the term of a refinanced loan. A loan refinance is subject to the same restrictions as a new loan. 5. Participant Signature Sign this application and submit it for VTA’s approval. 6. Authorized Signature Once you have completed and signed this form, submit it for VTA’s approval. Special Instructions The interest rate on new and refinanced loans is determined by using the prevailing rate as specified in the Loan Guide- lines. Loan Guidelines are available from VTA. ICMA-RC typically sends out loan documents and checks two business days after receipt of complete and approved applica- tions received through 12 noon Eastern Time. Repayments will be scheduled to begin following the issuance of the loan. PLEASE KEEP A COPY OF YOUR COMPLETED APPLICATION FOR YOUR RECORDS P.O. Box 96220 Washington, DC 20090-6220 Toll Free 1-800-669-7400 En Español llame al 1-800-669-8216 wwww.icmarc.org PKT000-009-200604-106071-C1195 REVISED APRIL 2006