Life insurance; security.

(a) Should a participant obtaining a loan terminate employment for any reason, the participant shall be required to post security or collateral to allow for payments on the loan to continue subsequent to retirement or repay the loan balance within 60 days after termination, or the participant's retirement benefit under Division 6 shall be affected. The entire pension loan, including interest thereon, shall be paid in full prior to receiving any pension benefits funds or return of contributions. Provided however, if the participant is due to collect a retirement benefit beginning immediately upon termination, the posting of insurance and/or security shall allow the payments to be deducted from the participant's pension check. Such security may include a policy of insurance on his or her life, all premiums payable by the participant, providing for the insurance company to repay the unpaid balance of the loan in the event of his or her death or such other security as the treasurer of the fund may require. In no event may the participant be required to maintain an amount of life insurance exceeding the unpaid balance of the loan attributable to the participant applying therefor.

(b) Should the participant fail to repay his or her loan in full or as otherwise set forth in section (b) the participant shall not be permitted to draw a pension benefit calculated in Division 6, but may only receive a return of contributions, less any unpaid pension loan balance.

(Act 2006-339, p. 851, Art. VII, §3.)