crossing the line re "advice"?

I've got a MEP that allows for self-certified hardships.  A hardship request will go from the participant to the recordkeeper to us (TPA) to the MEP sponsor and then back to the recordkeeper for processing.  Fairly standard.

Found out today that the MEP sponsor will reach out to the adopting employer to say something like "hey, Participant is looking to take a hardship, maybe you want to talk to them about it", and sometimes they do and they arrange for a bonus or company loan so that the participant doesn't have to reduce their plan balance.

I don't think I like this.  I don't like that it introduces a possible level of unfairness (does every participant get spoken to?), maybe it blurs the line of investing advice ("don't take a taxable distribution, do this instead"), and maybe even some kind of privacy issue (though I'd think a participant should expect that they are requesting a hardship is pertinent plan administration information).

But I can't say for sure if this is actually black-and-white wrong, or if it just feels icky.  Thoughts?  Thanks.

One stand-alone thought is that, although a participant’s engagement with the plan can be expected to involve various administrative or investment service providers, confidentiality would apply to the employer. The employer should not be informed.

This general principle is subject to a fairly common (and questionable) practice of naming the employer as some sort of fiduciary, which would engage the employer in its administrative/fiduciary capacity.

if the employer serves in some fiduciary capacity that involves it in the matter, the employer is subject to fiduciary responsibilities with respect to its actions, which would cover some of the concerns that you mention. The unlikelihood that the employer would actually have any idea about its fiduciary responsibility (as opposed to how it reacts in its employer interests) in this regard is one reason why employers should not be named fiduciaries.