Loan fee change?

[Guest PensionPrincess]

We have a client with Nationwide, and we are moving their existing loans to the new Nationwide Loan Administration system. Nationwide charges $1 per month per loan (deducted from the participant's account).

Participants with loans have already signed their Loan Agreements, etc. and have paid their set up fees as specified in the paperwork.

Can this new loan fee be tacked on because they are getting these upgrades and functionality (online access/viewing, loan payoff requests, and consolidated quarterly statements)?? Or will this Nationwide fee change the terms of the loan?

[mming]

I would have the participants sign either a new loan agreement or an addendum to their existing agreement to be on the safe side. Another concern would be whether this new fee would violate what the plan's SPD says regarding specific loan fees that get deducted from a participant's account - an SMM may be in order.

[BG5150]

And what if someone refuses to sign such an amendment? You can't cancel the loan on them.

Would it be a problem for the Employer to pick up the tab for the existing loans, and all new loan be subject to the fee? Or maybe negotiate w/ Nationwide to waive the fee for existing loans?

[Guest PensionPrincess]

Thanks for your replies! Here's a couple of updates:

-Nationwide can't work with us on this one because of the way their system is set up.

-The loan agreements that the participants signed don't have any FEE language on there. To put this fee in place would not change the terms of the original agreements they signed.

-The only place the fees appear is the SPD's Appendix for Plan Expense Allocations, and that has a line on there that reads "All fees are subject to change."

I'm thinking we'll be ok to implement this additional fee with an SMM. Thoughts??

[MWeddell]

I'd still be inclined to err on the side of not charging fees on the existing loans.

Just because the loan agreement or promissory note is silent on the issue does not mean that the plan may unilaterally decide to charge fees whenever it feels like doing so.

Asking participants with existing loans to sign an addendum consenting to loan fees does not sound like a practical suggestion to me.

[K2retire]

Thanks for your replies! Here's a couple of updates:

-Nationwide can't work with us on this one because of the way their system is set up.

Thoughts??

If the can't or won't work with you on this (or any other issue) it's probably time to look into another provider who better suits your needs.