Participant Loans

[k man]

Does it cause a problem if a TPA receives, reviews and makes the decision to grant participant loans in accordance with the provisions in the Loan Policy? In this case the loan policy is not part of the Plan document. I see the discretionary decsion as to whether or not to make a loan as a discretionary (fiduciary) function.

What if there are no restrictions for loans (loans can be made for any reason) and the terms (interest rates etc.) are given to the TPA?

If it is a fiduciary function, what is the potential liability for a bad loan? I see it as an excise tax DOL Compliance issue.

[E as in ERISA]

It can be a fine line. When an administrator follows specific procedures established by the sponsor/fiduciary, etc. the DOL or courts don't necessarily consider the administrator to be acting in a fiduciary capacity in making the initial determination -- as long as the sponsor or other fiduciary has the ability to review that decision. But it isn't risk free.

[KIP KRAUS]

K man

I don’t understand how a plan can provide for participant loans when the plan document does not specifically allow them? Wouldn’t it be advisable to amend the plan and add the loan provisions?