adding loans... and fee disclosure

[AlbanyConsultant]

I've got a plan that wants to be nice and add loans until 9/23/20 as part of the CARES options.  Loans were never offered in the plan before.  The plan sponsor would like to pass the costs of the loans on to the participants.  Functionally, do we add the loan provision dated 30 days from now, giving out the notice today that starts the fee disclosure clock?  That feels wrong, if not from a legal standpoint, then certainly from a "doing the right thing" standpoint (and I fully realize that sometimes the rules are written such that "doing the right thing" is not as easy as it could be).

[Bird]

Without looking it up, isn't there something in the regs about giving notice asap if 30 days is not practical?  No one can possibly complain if you give the fee disclosure with the loan application.  Anyway, I would do it without hesitation.

[RatherBeGolfing]

Agree with @Bird. 

If you had an loan provision and you decided to change to add a fee or change a fee, I'd lean more towards do the 30 days even if not practical.  

In this case, loans are available for 180 days and people need cash now.  I would add it as of today no hesitation.

[C. B. Zeller]

Here is the language from 404a-5(c)(3)(i)(B): If there is a change to the information described in paragraph (c)(3)(i)(A) of this section [individual expenses charged to the participant's account], each participant and beneficiary must be furnished a description of such change at least 30 days, but not more than 90 days, in advance of the effective date of such change, unless the inability to provide such advance notice is due to events that were unforeseeable or circumstances beyond the control of the plan administrator, in which case notice of such change must be furnished as soon as reasonably practicable.

I think passage of the CARES Act meets the standard of being unforeseeable/beyond the control of the plan administrator. Adding the loan provision might not be, but under the circumstances I agree it would do more harm than good to make participants wait the 30 days before making loans available.

[Bird]

2 hours ago, C. B. Zeller said:

Here is the language from 404a-5(c)(3)(i)(B): If there is a change to the information described in paragraph (c)(3)(i)(A) of this section [individual expenses charged to the participant's account], each participant and beneficiary must be furnished a description of such change at least 30 days, but not more than 90 days, in advance of the effective date of such change, unless the inability to provide such advance notice is due to events that were unforeseeable or circumstances beyond the control of the plan administrator, in which case notice of such change must be furnished as soon as reasonably practicable.

I think passage of the CARES Act meets the standard of being unforeseeable/beyond the control of the plan administrator. Adding the loan provision might not be, but under the circumstances I agree it would do more harm than good to make participants wait the 30 days before making loans available.

Absolutely/thanks for the cite.