97 / 499
Prepared for Springfield R-XII School District
15
same business day and the direct deposit (or hard copy check, if desired) of loan proceeds,
loan note, disclosure statement, and amortization schedule are distributed to the participant
the following business day.
Repayment
VALIC is flexible with regard to loan repayment processing for participants. Loan
repayments can be made via ACH debit initiated by VALIC directly from the participant’s
bank account or alternatively if the plan sponsor prefers, repayments can be made via
payroll deduction and transmitted to VALIC as part of the ongoing contribution process.
Missed Payment, Catch-Up Payments
If a loan payment is missed because of no compensation, a catch-up payment can be
accommodated along with a subsequent regular payment. The final payment may be slightly
affected.
Number of Loans
Multiple outstanding loans are accommodated on VALIC’s recordkeeping system if allowed
by the plan document and the plan sponsor’s loan policy. There is no system limitation as to
the number of loans; however, each loan’s repayment amount must be identified separately
in the payroll feed from the plan sponsor.
Payments While On Leave
VALIC can accept additional loan payments and scheduled payments when a participant is
on family or medical leave.
Payment Delinquencies
If a loan payment is not received within 65 days after the payment due date, VALIC will send
a default warning notice to the participant advising them of the past due status and of the
consequences of not making a payment promptly. The notice informs the participant that,
once defaulted, the unpaid balance of the loan, plus the interest due, will be reported to the
Internal Revenue Service as a taxable distribution.
Loan Defaults
If a loan payment is not made within 90 days after the due date, the entire outstanding loan
amount, plus any interest due, is treated as a taxable distribution. Defaulted loan amounts
are taxed as ordinary income, and may be subject to a 10% federal tax penalty if the
employee is under age 59-½. VALIC will send a default warning notice to the participant
advising them of the past due status and of the consequences of not making a payment
promptly. The notice informs the participant that, once defaulted, the unpaid balance of the
loan, plus the interest due, will be reported to the Internal Revenue Service as a taxable
distribution. If the loan is secured by amounts subject to withdrawal restrictions, the loan will
remain outstanding until a distribution event occurs.
8. Describe in detail how your system handles Federal and State tax reporting (i.e. Form
1099R, W-2 for 457 plan). Do you provide tax form preparation and filing?
VALIC prepares and distributes the Form 1099R and all applicable tax forms as required by
the Internal Revenue Service to any participant who has received a distribution by January