Search the Community

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.

Good afternoon everyone! I'm hoping one of the bright minds on here can shine some light on the following topic and proposed solution: Company A has a 401k plan with it's assets in participant directed accounts with a recordkeeper. Company B became part of an affiliated service group with Company A however previously participated in a MEP. They ceased participation in the MEP and want to move their assets in that plan to Merrill Lynch. To do this there are a few options: 1. Sponsor their own plan with the assets in a trustee directed brokerage account (pooled account with both HCE and non-HCE assets) with Merrill Lynch and transfer the assets from the MEP into it. Company A is much larger than Company B and since BRF testing would be needed due to different investment options, by using a trustee directed brokerage account, BRF testing on the benefit of having participant directed accounts would pass. 2. Sponsor their own plan and transfer the assets from the MEP into it, terminate it and rollover their assets into IRAs at Merrill Lynch and then wait a year to participate in Company A's plan. 3. Transfer the MEP assets into a trustee directed brokerage account with Merrill Lynch that is considered part of Company A's plan. Question 1: Is option 3 permissible? I have never seen a plan that has both participant directed accounts and a trustee directed brokerage account. Company B would be the only one with assets in the brokerage account but both Company A and B will have participant directed accounts under Company A's plan Question 2: Would the BRF testing be done again only on the right to have participant directed accounts or is there a concern that only Company B has the right to have assets in a trustee directed brokerage account?