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I hear you kgr12 but then there is no protection for the participant from a change of heart or change of control (but not Ch. 11).

I would argue the limitation of allowing the increase "only to maximum" is dicriminatory in practice and interpret it as increases in the last 2 months are allowed. That said, I'm not sure why in this day and age the Plan doesn't allow changes as frequently as the participant want to fill out new forms but that's a separate issue.

Yes if you are eligible to file an EZ but chose to file a 1 person SF you are not required to file if assets are under $250K. But it only applies to plans eligible to file an EZ not all plans under $250K. You can search the 5500-SF instructions til the cows come home but unless they make changes to the instructions in a future printing, you won't find it.

Sure, but in a DB plan, a low interest rate or default would not impact benefits, just employer funding. Re Larry's points, are you saying Larry that you set up loans such that for rate of return purposes (other than the negative rate of a return of a default), the loan is a pooled investment of all accounts, but if there is a default, you take the amount of the default out of the borrowing participant's account? Again, I think you can do that, but I think most plans, maybe nearly all, make the borrowing participant's loan an investment of his/her account for all purposes, so that (1) if equities outperform the loan (which they likely will over a five-year period) the "hit" is on the borrowing participant, (2) you can tell the participant that he or she is paying interest to him/herself, and (3) if there is a default, the loss is borne solely by the participant (which I understand is still the case in the system you describe, if I understand it correctly). And you don't see a fiduciary issue if (1) the owner takes a loan at prime + 1, (2) equities outperform prime + 1 over 5 years, and (3) because all of the investment characteristics of the loan (other than default) are allocated proportionally over all accounts the owner gets some of the equity return on the money he or she has borrowed, and conversely the non-borrowers get some of the loan interest even though some of their mutual funds were cashed out to fund the loan? It doesn't have to be just the owner or a small plan situation. People feel comfortable based on informal guidance and on the security of the loan and market rates in saying that a relatively low interest rate (e.g., prime + 1 or 2%) is OK for participant loans, but no one would want to invest the rest of their plan assets with a hope of just getting prime + 1 or 2% for five years.

To those who feel that there is some problem with allowing participant loans as a pooled investment, remember that participant loans are also permitted in DB plans.