Participant Loans to Retirees (non party-in-interest)

[Guest CJK]

A 401(k) plan currently allows "participant loans" for "parties-in-interest" participants. By this I mean that loans are only available, basically, to participants who are also employees. This approach is described as being permissable in DOL Information Letter to Gordon H. Mattson dated May 4, 1995.

The Sponsor is exploring the idea of opening the availability of "participant loans" to retirees. Retirees are not "parties-in-interest." Again, referring to the Mattson letter, the DOL does not have a problem with opening the participant loan availability to "non parties-in interest" as long as it is available to all "non parties-in-interest" participants.

I sort of remember hearing or reading something for DOL stating that DOL felt it was imprudent to have a participant loan extend beyond a participant's normal retirement age without pledging outside collateral. I cannot find anything in print on this point. I was hoping that someone could shed some light in this for me.