Benefits Plans - 457(b) Deferred Compensation Plan: Loans

What is a 457(b) loan?
You may borrow from your 457(b) account at any time, for any reason, regardless of whether your employment is active or terminated.

How much can I borrow?
Generally, you may borrow up to 45% of your TIAA-CREF SRA and 50% of your Fidelity SRA accumulation.  The minimum loan amount is $1,000 and the maximum is $50,000.  This is a combined loan limit and applies to all of your U-M SRA and 457(b) accounts with both vendors.

Are there any fees for taking a loan?
No.

Do I pay income tax for taking a loan?
No. The loan is not treated as a cash withdrawal, so there is no income tax due. However, if you default on the loan, then it is deemed to be a withdrawal and taxes are due. Keep in mind that you are using after-tax dollars to repay your loan that was funded with tax-deferred contributions.

How long do I have to repay the loan?
You may choose the length of the repayment period, from one to five years. You may choose a longer repayment period if the loan is used solely for the purchase of your principal residence.

How do I repay the loan?
Monthly payments are made directly to TIAA-CREF and/or Fidelity Investments. Payroll deductions are not available through the University; however, you can arrange an automatic debit from your checking or savings account.

Will I be charged interest for the loan?
Yes. The rate is variable; contact TIAA-CREF and/or Fidelity Investments for the current interest rates. The interest you pay is not tax-deductible.

Can I prepay my loan?
Yes. You can pay off your loan early with no penalties.

Does taking a loan affect my participation in the U-M plan?
No. You may continue to participate in the U-M 457(b) Plan if you take a loan.

How do I arrange for a loan?
Contact TIAA-CREF and/or Fidelity and request a loan application. Employer authorization for a loan is not needed. Return the investment carrier’s loan application to them after you have completed the form.

Next: What are My Options When I Leave U-M?

Limitations
The University of Michigan in its sole discretion may modify, amend, or terminate the benefits provided with respect to any individual receiving benefits, including active employees, retirees, and their dependents. Although the university has elected to provide these benefits this year, no individual has a vested right to any of the benefits provided. Nothing in these materials gives any individual the right to continued benefits beyond the time the university modifies, amends, or terminates the benefit. Anyone seeking or accepting any of the benefits provided will be deemed to have accepted the terms of the benefits programs and the university's right to modify, amend or terminate them.