Participant Disclosure and Plan Amendment

[Jennifer D.]

What are others doing in the situation where you have a client who would like to amend their plan to add or remove a feature that will change the fees the participants pay? I know a participant change notice should be disclosed. The issue is timing. If the disclosure of the change has to be provided 30 days before the participant could be affected, but the employer wants to, for example, add loans to the plan immediately, are you postponing the effective date of when loans can be effective? Are you just telling participants they will be charged in 30 days? Is anyone doing anything else?

[MoJo]

What are others doing in the situation where you have a client who would like to amend their plan to add or remove a feature that will change the fees the participants pay? I know a participant change notice should be disclosed. The issue is timing. If the disclosure of the change has to be provided 30 days before the participant could be affected, but the employer wants to, for example, add loans to the plan immediately, are you postponing the effective date of when loans can be effective? Are you just telling participants they will be charged in 30 days? Is anyone doing anything else?

If I'm not mistaken, the "changed" notice needs to go out in advance *unless* it isn't possible to do so, then it needs to go out within a reasonable period after. My *experience* has been the latter is more the norm rather than the former....

[Belgarath]

I think a voluntary amendment would rarely qualify for the "not possible" exception. In this situation, I'd tell the employer they have two choices - don't make the loan provision effective for at least 30 days, or make the loan provision effective immediately BUT, can't charge any fees to the participant's account until there has been at least 30 days notice. So any loan taken prior to the expiration of the 30 days - no fee. But maybe I'm overly conservative.

A major PIA as far as I'm concerned.

[MoJo]

I think a voluntary amendment would rarely qualify for the "not possible" exception. In this situation, I'd tell the employer they have two choices - don't make the loan provision effective for at least 30 days, or make the loan provision effective immediately BUT, can't charge any fees to the participant's account until there has been at least 30 days notice. So any loan taken prior to the expiration of the 30 days - no fee. But maybe I'm overly conservative.

A major PIA as far as I'm concerned.

While "in theory" I agree with you (especially the part about it being a PIA), in practice, "ain't gonna happen." In the "small" market, usually the loan app is already in process (someone has a serious need) before the amendment is done, and the plan sponsor isn't going to stop the loan because of the fee disclosure regs.