Deferral Change frequency

The 401k Plan Sponsor wants to change when participants can make deferral changes from monthly to annually.  The plan document allows for it.  Are there any consequences if they make that change?

Pissed off employees?

If the proposed change is to save some admin fees, the ER should be honest and transparent about it.

I'm sure that will not go over well with the employees and I don't know why he wants such a drastic change.  But would this impact 404(c) compliance if they can only change deferral percentages annually?

404(c) means they have to be able to transfer investments at least quarterly, but the deferral rate isn't tied to that.

I do not recollect a restriction on the timing of deferrals.  I will note that often times reducing the number of time deferral elections can be made ends up be a bigger administrative burden because all the changes are going to come at once.  Also, if the employer does change the timeframe for making deferral elections from monthly to annually, you might want to suggest that the employer keep the monthly election if a participant wants to go to a 0% election.