PRINCE FREDERICK, Md. — Calvert’s Board of County Commissioners (BOCC) approved updates to the Employees’ Retirement Savings Plan loan, giving county employees more freedom to borrow against their 401(a) T. Rowe Price accounts.
Under the current plan, participant loans may only be approved by the plan administrator if deemed necessary to meet an “immediate and heavy financial hardship.” The plan defines this as hardship caused by one of four specific circumstances:
- Medical expenses for the participant, spouse or dependents;
- Costs related to the purchase of a principal residence (excluding mortgage payments);
- Tuition, educational fees and room and board expenses for up to 12 months of postsecondary education for the participant, spouse or dependents;
- Prevention of eviction or foreclosure from the participant’s principal residence.
Speaking to the BOCC at the May 5 meeting, the human resources director for Calvert County said that this structure limits flexibility for participants who may face other financial hardships that are equally significant but not covered under the four enumerated categories.
Woodson encouraged the BOCC to pass the fifth amendment to the provision, which proposed removing these restrictions and allowing loans for any personal financial reason, consistent with IRS rules, while maintaining the plan’s existing IRS loan limits, repayment terms and safeguards.
Woodson added that adopting this amendment would provide participants with greater autonomy to manage their financial needs. Instead of requiring participants to demonstrate one of the four hardship categories, they would be permitted to request a loan for a broader range of financial circumstances, provided the request remains compliant with Internal Revenue Code requirements. All other provisions of the plan regarding minimum and maximum loan amounts, repayment schedules, security and default would remain unchanged.
This plan works by having employees borrow against their own vested account balance, with repayments (including interest) credited back to the participant’s account. The county bears no cost or liability related to loan issuance. Repayment is collected directly from the employee’s paycheck according to their loan terms. Federal guidelines require the county to collect interest on the loans, but the interest is repaid back into the employee’s account.
“I was really surprised to see these four specific circumstances,” Commissioner Catherine Grasso said. “This is the people’s money. I mean what are we, big mama, big daddy? No, no. Let the people do with their money what they want.”
Board members agreed with Woodson’s proposal and approved the amendment update 5-0.
“The employees thank you,” Woodson said.
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