Participant loan availability conditions

[Santo Gold]

Could a 403(b) loan program be established in a way that a loan can be taken for any reason, but only for individuals with “X” years of service (e.g., 10 years of service)?  The plan in question does not have any HCEs so there would not be a discrimination issue, but in general is it permitted to structure a loan program in this manner?

Thank you for any replies

 

 

[ratherbereading]

I would say no. 

[Peter Gulia]

If the plan is ERISA-governed, no.

ERISA § 408(b)(1) “exempts from the prohibitions of section 406(a), 406(b)(1) and 406(b)(2) loans by a plan to parties in interest who are participants or beneficiaries of the plan” only if, with further conditions, “such loans [a]re available to all such participants and beneficiaries on a reasonably equivalent basis[.]”

29 C.F.R. § 2550.408b 1(a)(1)(i) (emphasis added) https://www.ecfr.gov/current/title-29/subtitle-B/chapter-XXV/subchapter-F/part-2550/section-2550.408b-1#p-2550.408b-1(a)(1)(i)

Otherwise, a participant loan is a nonexempt prohibited transaction.

[Santo Gold]

Thats sounds pretty definitive.  Thanks for the replies.