Some of Johnson’sTax Sheltered Annuity (TSA) accounts have outstanding loans. In the past, shareholders were allowed to borrow money from TSA accounts; in other words, from themselves. Now, Johnson Investments no longer allows new loans to be made. The Correspondence Department, however, is responsible for servicing the outstanding loans.
The initial screen that you will view in the Outstanding Loan Database provides the name, account number and loan number for each TS- loan.
Loan repayments are processed by Automated Clearing House (ACH).Most of these repayments run on the 6th of each month, but there are some others that will run on other dates (usually the date of the month the original Systematic Purchase plan was established on the systemg). You will need to determine the date that a loan is either due to end without being paid in full orthe date on which it will be paid in full. By being aware of this date, you can ensure that the SYSPURCH can be stopped in time to prevent another loan repayment from being processed. If the loan is due to end, but the final payment has not been received, you may either call the shareholder or write a letter.
You will run the SIP Stop Report on either the 10th or 11th of the month to give any repayment time to be reversed if the ACH is rejected.
SIP STOP REPORT
The SIP Stop Report provides the name, account number and loan number of any loans that are scheduled to be paid in full during the current month or were paid in full the previous month. Any loans scheduled to be completed on the 6th of the current month or any date later than the 6th in the previous month will be included here.
Please take the following steps to utilize this report:
1.)Go to the TS- Loan Program, which is accessed through an icon that will be added to the desktops’ of some associates, and open the application.
2.)Go to Reports and select SIP Stops. A report stating the shareholders’ names, account numbers and loan numbers will appear. The caption will state the following:
Listed below are the shareholders that will make their final loan repayment this month. After the (current month) loan repayment, stop the following loan SIPs:
3.)Print out the SIP Stop Report and review the accounts listed.
Because the TSA Loan Database does not interact with TA2000 and DST, you must consider the possibility that it is incorrect. Loan repayments or an election to default may not be reflected here. Therefore, it is essential that you examine the account on TA2000.
If the TA2000 History section reflects a recent loan repayment, but does not reflect a recent ACH reject, you may conclude that the balance of the loan has been paid:
You may then do the following:
4.) Return to the loan database and bring up the Loan Information Screen.
5.) If TA2000 reflects that the loan repayments are all current, change the Status of the loan from Active to Paid on the Loan Information Screen.
6.) Go to AWD and create a new TS-LOAN work object using the Create Work function.
- Go to Line of Business and pull up the TS-Loan Letters. If there is only one loancurrently active and that one loan has been paid off, select 92L-G:
You have made the final payment on your TSA Loan. We have suspended the automatic repayments from your bank. We have enclosed your Promissory Note, which is marked as "Paid," for your records.
If you have any questions, please call us on our toll-free number, 18002252200. Our Client Service Representatives are available 8:00 a.m. to 6:00 p.m. Eastern time and will be happy to assist you.
B. If the client only has one loan and that loan has been paid, clone an HMAINT from the TSALOAN work object and comment the HMAINT as follows:
Client has paid off loan in full, please do the following:
A.)Remove Stop Transfer from account
B.)Stop SYSTEM-PURCH on account
7.)A. If there are two loans currently active with just one being paid in full, select letter 92-LH:
You have made the final payment on your TSA Loan number ~Enter Loan Number~. Your automatic repayments from your bank have been reduced to $~Enter new AIP amount~ to cover your other loan. We have enclosed your Promissory Note for loan number ~Enter Loan Number~ marked as "Paid" for your records.
If you have any questions, please call us on our toll-free number, 18002252200. Our Client Service Representatives are available 8:00 a.m. to 6:00 p.m. Eastern time and will be happy to assist you.
B.)If the client has two loans and one is being paid off, clone an HMAINT from the
TSALOAN work object and comment the HMAINT as follows:
“Client has paid off loan #12345. Please reduce SYSPURCH to $50 per month.”
8.) After writing the appropriate “Loan Paid” letter, you may then pull the loan file from the cabinet. Find the Promissory note, stamp it with the “paid” stamp and enclose it with the letter.
9.) The author of the letter must perform a Quality Control function by examining the letter before printing it.
10.) Mark the loan file folder as “paid” and put the file copy letter in with the file and place in the area designated for the “non-active” files (previously paid and defaulted loans).
11.) Mail the loan paid letter and the original promissory note, marked “Paid,” to the client. Save copy of the letter in the TS-loan file.
The table below contains the same information provided above; we have provided it to give associates a different format that some may find easier to use.
1.0Go to the TS Loan Program icon. / A review of the Last Payments report will indicate which loans will be paid off the next month. Review this report and TA2000 to see if all payments were actually made and that the loan is in good order. / TS Loan SystemTA2000 Desktop History Window
TA2000 Desktop Systematic Window
2.0 Go to Reports and select AIP Stops / Verify that this is the last payment for the account(s). / TA2000 Desktop
TS Loan System
3.0Print out the AIP Stop Report / If the shareholder only has one loan, GO TO STEP 4.0.
If the shareholder has more than one loan, GO TO STEP 5.0. / TA2000 Desktop
TS Loan System
4.0Return to the loan
database and bring up the
Loan Information
Screen. / Stop the AIP on the account or accounts in question. / TS Loan System
5.0Change the Status of the
loan to Paid on the Loan
Information Screen. / If no other loans are outstanding, GO TO STEP 6.0.
If other loans are outstanding, GO TO STEP 7.0. / TS Loan System
6.0 A Go to AWD and create a new TS-LOAN work object / Select letter 92-LG / TA2000 Desktop Systematic Window
6.0 B Clone an Hmaint from the TS Loan work object / Add comments requesting that the SIP on the account in question be stopped. / TA2000 Desktop Systematic Window
7.0 AGo to AWD and create a new TS-LOAN work object / Select letter 92-LH / TA2000 Desktop Systematic Window
7.0 B Clone an Hmaint from the
TS Loan work object / Add comments requesting that the AIP payment be reduced to support only the existing payoff for the last loan / TA2000 Desktop Systematic Window
8.0 Pull the loan file from the cabinet / Stamp the promissory note and enclose it with the letter. / File Cabinet
9.0Have a Quality Control function performed on the letter / Create letter on EnCorr for “TSA Loan Paid” and pull original promissory note to mail with the letter to the client. Link letter and Promissory note under a CorCold.
EnCorr will pre-fill the account information on the letter. / Encorr/AWD
10.0 Mark loans as Paid. / Mark the associated loans on the TS- Loan system as “Paid.” / TS Loan System
11.0 Mail the letter / Mail the loan paid letter and the original promissory note, marked “Paid” to the client. Save copy of letter in TS loan file. / Mail
ACTIVITY ON CURRENT LOAN ACCOUNTS
You will sometimes receive transfer or redemption documents for accounts that have a current loan balance. This will be rejected to Correspondence because of the Stop Transfer code that was placed on all accounts at the time the loan was made.
When a transfer document is received and the client wants a full transfer or redemption despite havingan outstanding loan, please do the following:
1.) Pull up the Loan Database.
2.) Look up the client’s account.
3.) Put your cursor on the loan, go to Reports and select the Amortizationoption.
4.) Review the Amortization schedule and find the current outstanding balance on the loan.
5.)Go to the most recent loan repayment date and you will find the current balance in the New Balance column on the far right.
As mentioned earlier, because the Outstanding Loan Database does not interact with TA2000 and DST, you must consider the possibility that it is incorrect or incomplete. Some loan repayments may not be reflected here.
Therefore, it is essential that you examine the account on TA2000. If the TA2000 History section does not include any recent loan repayments that were made after the most recent datelisted in the Database, you may conclude that the balance listed in the New Balance column is correct.
6.) You will then write a letter (you can mix one of the TS-Loan letters and some freeform) to write to the client and request that they do one of the following:
- Pay the balance in full before transferring the account
- Default on the current loan balance
- Do a partial transfer.
The following is an example of how this system generated letter can be revised to fit this situation:
“Thank you for your recent request to transfer the registration of the referenced account. Your Tax Sheltered Annuity (TSA) loan has a current balance of $24,287.97. If you transfer the entire account balance, your TSA Loan will be declared in default and we will reclassify it as a taxable distribution. You may instead request that the remaining loan balance be repaid before transferring the registration. You may also request a partial transfer with the remaining balance being used to pay the loan in full.
If you elect to default on the loan, this will be taxable for 2004, and you will receive a 1099R form at year-end.”
Important Note: If the client is only requesting a partial transfer/liquidation, look up the current balance of the loan on the loan database as previously outlined. The client is allowed to transfer/liquidate everything in the account minus the outstanding balance of the loan and the loan repayments will continue to run.
Loan Missed Payments
This section details the policy and procedure for TS-Loan missed payments. Following these guidelines will ensure consistent service delivery.
Electronic Funds Transfer (EFT) is the method for making all TS-loan repayments back into the fund account.
When loan repayments reject for any reason a letter needs to be sent to the shareholder requesting the missed payment and new bank information if appropriate.
In some cases, a call will be made by the Correspondence Department to the shareholder. This is always done if the missed payment is the final scheduled payment for the loan and it is over one month after that payment was due.
Please take the following steps:
1.) Receive daily EFT reject report to determine presence of any TS-loan accounts.
2.)Review the Report and TSA accounts and determine if the account has had more than one missed payment. This will determine which letter to use.
3.) Determine if the missed payment is the last scheduled payment to pay the loan in full. If so, attempt to call the shareholder to resolve the issue.
4.) If this is not the last scheduled payment, or you can’t contact the shareholder by phone, create a letter on Encorr.
5.) If this is the first missed payment, create a letter using Loan C in the Encorr system to request the missed payment and updated bank information.
6.) If this is the second consecutive missed payment, or the fourth missed payment in less than one year, create a letter using Loan D and send to the client. If a shareholder misses three consecutive payments, or a total of five payments in one year, the loan is in default. This letter will request that the missed payments be made or default procedures will apply. EnCorr will pre-fill the letter with account information.
7.) Save a File Copy of the letter and place it in the Client’s loan file in the cabinet.
8.) The author of the letter should perform a Quality Control function by examining the letter to ensure its accuracy. He or she should also ensure that the letter contains no typographical or grammatical errors.
9.) Mail the letter, along with any enclosures, to the shareholder.
Step / Business Standard / Application1.0Receive the Reject Report from Control / Receive daily EFT reject report to determine presence of any TS loan accounts. / Reports
2.0Review Report and TS accounts to determine if the account had more than one missed payment. / If the account had only this one missed payment, GO TO STEP 3.0.
If the account had more than this one missed payment, GO TO STEP 7.0. / T-2000
Report/Loan File
3.0 Determine if the missed payment is the last scheduled payment required to pay the loan in full / If the last payment is the final scheduled payment to pay the loan in full, attempt to call the shareholder / Report/Loan File
4.0If this is not the last scheduled payment, or you are unable to contact the shareholder by phone, Create letter using Encorr
. / Determine the correct letter that needs to be sent to the shareholder. / T-2000 Desktop
Encorr
5.0 Determine if this is the shareholder’s first missed payment, / If this is the first missed payment, select letter 92-LC. / T-2000 Desktop
Encorr
6.0 If this is the second missed payment, send the appropriate letter. / Select letter 92-LD. / T-2000 Desktop
Encorr
7.0Save letter in file and copy to AWD. / Copy of letter saved in client’s loan file and to AWD
Place client’s file in Monthly Reject section to be reviewed at a later date. / AWD
File Cabinet
8.0 QC letter on EnCorr. / Perform QC function for the letter on EnCorr to ensure accuracy. / EnCorr
9.0 Mail the letter. / The letter should be placed along with any applicable enclosures in an envelope and put in the outgoing mail bin. / Mail
LOAN DEFAULTS
Loans can be defaulted for three reasons:
- Upon the client’s request
- Aftermissing 3 consecutive ACH Loan repayments.
- After missing 5 ACH Loan repayments in one year.
When the client requests the default of the loan, please do the following:
1.) After being notified of the client’s request, go to the loan database.
2.) Look up the current balance of the loan in the database. Please also look up the account in TA2000 to ensure that there are no recent payments that are not reflected in the balance in the database.
3.) Open up the Outstanding Loan Information Screen and change the Status of the loan from Active to Defaulted.
4.) Write to the shareholder using letter 92-LE:
Your TSA Loan, in the amount of $~Enter outstanding loan balance~ has been declared in default, pursuant to your request, and reclassified as a taxable distribution. This is taxable for ~Enter taxable year~, and you will receive a 1099R form at year-end.
As stated in our Loan Provisions, since you have defaulted on your TS- Loan, you will not be permitted to take future loans from your Johnson account.
If you have any questions, please call us on our toll-free number, 18002252200. Our Client Service Representatives are available 8:00 a.m. to 6:00 p.m. Eastern time and will be happy to assist you.
5.) Clone a REDEEM from the TSALOAN work object you are writing the default letter on and add the following comment to the REDEEM:
“Client is defaulting on loan. Please remove Stop Transfer from account and process loan default in the amount of (loan balance amount).”
6.) Mail the letter and any applicable enclosures to the shareholder.
Step / Business Standard / Application1.0 Receive request from
client in writing to
default the loan and go
to the loan database.
. / Receive an EFT Reject report to review for the presence of any TS- Loan accounts. / TA2000
TSA Loan system
2.0 Go to the Loan Database and look up the current balance. Also check TA2000. / Determine the dollar amount that is still owed. / Report/Loan File
3.0Open up the Outstanding Loan Information Screen / Code the loan on the TS- loan system as in default and enter the default amount.
Create AWD Work item-CorCold and comment that account is in default / TA2000 Desktop AWD
TSA Loan System
4.0Write to the shareholder / Create letter on EnCorr, using 92-LE, to inform the client that the account is in default, the taxable consequences and ineligibility for future loans.
EnCorr will pre-fill the account information on the letter. / EnCorr
5.0Clone a Redeem from the TS-Loan work object and add comments / QC the letter for correct information.
Copy of letter is saved in the clients loan file and to AWD. / AWD
Encorr
6.0Mail the letter / The letter should be stuffed along with any applicable enclosures in an envelope and put in the outgoing mail / Mail
If the loan is being defaulted due to missed payments, please do the following: