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BTW, your clients will not like better security arrangements, because they are not available off the shelf from the providers. They are not available from providers because they cannot administered with a push of a button, and the general market will not tolerate cost of administrative arrangements that cannot be mechanized.

What you describe is a ruling that indicates that a condition to initiate a loan - being a requirement that payroll deduct be the only way to repay the loan, cannot be prohibited by a non-federal law. IT DOES NOT say that state based wage and hour laws can't give a participant the right to then remove consent to continuing withholding from their paycheck. There is a difference....

I disagree that state wage and hour laws are pre-empted by ERISA. ERISA's pre-emption only applies where state law is inconsistent with ERISA. I defy anyone to find ANYTHING in ERISA that says one can mandate a particular form of payment, and as you say, the "consent" is a "contract" and contracts are governed under state law, and many state laws provide that employees cannot be forced to have amounts withheld from pay absent (on-going) consent. Show me the inconsistency between state law and ERISA here. It simply doesn't exist.

Thanks! So, no inherent problem with granting additional service to former participants who will not be rehired?

Bill, thank you Andrew, I agree with you Thank you both

Also, if you add Nonelective Safe Harbor to an existing plan within one month of the plan year end (e.g. 12/1/2021 or later for a 2021 calendar-year plan), the minimum SH contribution percentage for that year is 4% instead of 3%. And according to our document provider, although Notices are technically no longer required for Nonelective SH, if you want to have the option to reduce or cease SH mid-year without a qualifying business hardship, Notices that include that language continue to need to be provided prior to each year.

Jak, the deadline to set up a new SH plan for 2021 is 10/1/21 because it has to be in existence for 3 months. For a SH match, you have to include it in the document and provide advance notice. For SH nonelective, you can include it from the beginning or add the provisions later. There's no notice required unless you have discretionary match that will satisfy ACP pass. No maybe notice required at all, that's baked in at this point.

Interesting discussion. I've looked into it more, spurred on by MoJo's forceful challenge, and now it is as clear as mud to me! The DOL has ruled on this issue before. ERISA Opinion Letter 96-01A concerns whether a Puerto Rican law is pre-empted by ERISA "insofar as it may be applied to prohibit a pension plan from requiring the repayment of plan loans through payroll deductions." The DOL writes: "Although the Department's previous opinions did not address the specific issue presented here, which concerns the discretionary methods by which a plan chooses to operate a participant loan program, we reach the same conclusion." The DOL concludes: "Therefore, it is the position of the Department that, to the extent P.R. Act 17 is interpreted to prohibit the repayment of plan loans through payroll deductions to employee benefit [*7] plans covered by Title I of ERISA, it is preempted by section 514(a) of ERISA." While there have been subsequent DOL rulings addressing that ERISA pre-empts state withholding laws regarding plan contributions, most recently a 2018 DOL Information Letter, none of the subsequent rulings address plan loans. It is possible to distinguish ERISA Opinion Letter 96-01A as applicable to the specific Puerto Rican law in question, which expressly affects pension plans, not perhaps not might not pre-empt other states' wage withholding laws. Note, however, that that argument depends on the wording of the specific state statute, not on the difference between contributions and loan repayments. The issue has been discussed at least a half dozen times in threads on these message boards. Of the threads I reread, the best prior discussion is from 2001. It addresses ERISA Opinion Letter 96-01A and MoJo also participated in that discussion, arguing his view even more persuasively: I still lean in favor of not honoring the participant's request to revoke the payroll withholding based on DOL Opinion Letter 96-01A but the issue is certainly muddy enough that I would refer the client to consult with its legal counsel.

The typical 401(k) participant loan agreement -- https://www.shrm.org/resourcesandtools/tools-and-samples/hr-forms/pages/401k_loanapplication.aspx -- includes a consent to repay the loan through payroll deductions. It is a contract so one party can't unilaterally change its terms. The participant agreed to it. State law is pre-empted by ERISA. So in response to the question posed by the original post, the plan sponsor should do nothing but explain to the participant that loan repayments will continue to be deducted from the participant's paychecks. I believe this is correct, but am not 100% confident in my conclusion. I don't believe the IRS or DOL has addressed the issue.

I've always felt that any/all money paid after death should be the designated bene's. The fact that it is being required under minimum distribution rules doesn't change that, IMO.

Or if employees abuse it, amend out plan loans. They aren't a protected benefit.

No. It is simply a consent to have loan payments deducted from pay, without more to secure the loan. The general view is that state law allows the consents to be revoked. That is another question that has been addressed repeatedly in this forum.

Depends on how the payment provisions are set up. If the participant is still an employee and has merely a consent to withhold from pay to secure the loan (shame on the fiduciary), then there is an argument that the employee may cancel the consent. No comment at this time on the argument. The recipient of the statement has some choices to make about the response. If the recipient believes that the consent may be withdrawn and wishes to assist, the the recipient advises the employee and informs about the consequences of default. If the recipient does not wish to assist, then the recipient (1) refers the employee to the appropriate plan representative, or (2) has to come up with an evasive answer, such as, too bad. Or refer the participant to the SPD or whatever document explains the loan policy, including explanation of procedures (including withdrawal if consent?) and consequences of default. Because the naked payroll deduction represents most arrangements, I am not going to bother with other scenarios unless you ask.

I haven't checked in a few months but I thought participants who died on or before 12/31/2019 are subject to pre-Secure Act rules and that participants who die after 12/31/2019 are subject to Secure Act rules.

Lou is right - the irrevocable election has to be provided before the participant first becomes eligible. Since this person became eligible on 1/1/16 the election signed in June 2016 is no good. Even if the election had been executed correctly, the employee is still considered non-excludable for 410(b) purposes. imho no one should ever use the irrevocable election. Whatever the employer's purpose in allowing it could be accomplished easier, and more in a more flexible way, using a class exclusion.