February 2005
Unemployment Draw:
A $5,000 interest free draw from contributions will be allowed to extend the period of unemployment compensation. Those not eligible for unemployment compensation will still be eligible for this provision. Lifetime catch-up contributions will be allowed to repay this outstanding loan. However, it will be in the account holder’s best interest to pay back this loan amount as quickly as possible. While the loan itself will not charge interest, the outstanding loan amount will cease to earn interest payments for the account holder.
This $5,000 draw is a total allowable lifetime draw. Once the draw has been paid back, a new draw may then be issued at another time. However, the total amount of outstanding draws against the account at any one time must not exceed this $5,000 limit.
To qualify for the $5,000 unemployment draw, a worker must first be vested into the program. To be fully vested, an account holder must have been a participant for at least 10 years and have a total account balance of at least $25,000. A partially vested account holder will have been a participant for at least 10 years, but have a total account balance of less than $25,000. He or she will be eligible for an unemployment draw of up to 20% of his or her total account balance.
The theory behind the unemployment draw is that it becomes harder for a worker to find new employment as he or she becomes more experienced and acquires more qualifications. Such middle-aged workers typically have more financial responsibilities than younger workers. Therefore, the unemployment draw is designed to provide extra support for older workers who may have a more difficult time finding suitable employment upon experiencing an unexpected job loss.
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