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cheersmate

Eliminate Loan Availability to Term Ppts Permitted?

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Facts:

A Safe Harbor 401k PSP currently permits all participants including terminated participants with vested account balances to take participant loans, with repayment via cashiers check (actives via payroll withholding).  In the course of permitting such loans, they have come to realize the difficulties in collecting payments and the resources used to follow-up, and, as a result want to modify the Plan's loan provision to permit loans only to Active Partipants and Parties in Interest going forward. 

Question:

Will an Amendment eliminating loan availability to terminated participants violate a BRF provision? Are they a protected BRF? Any existing loans will continue repayment as per there current terms. And as I said above, loans will continue to be available to Actives and PII. Or must the Amendment include a provision stating vested account balances as of the Amendment date must be protected and available for loan purposes even if termination occurs at some later date?

Thank you.

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Loans are not a protected benefit. I don't think there is a problem eliminating future loans for terminated participants.

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The availability of a loan is not a protected benefit.  

§1.411(d)-4, Q-1(d)

Quote

(d) Benefits that are not section 411(d)(6) protected benefits. The following benefits are examples of items that are not section 411(d)(6) protected benefits:

...

(4) The availability of loans (other than the distribution of an employee's accrued benefit upon default under a loan);

 

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