Location: Tampa, Florida
Companies Location: LA, California around $400 million in annual revenue ~100 employees.
Looking for some advice on a weird (and honestly pretty shady) situation with my employer’s 401(k).
For the past couple years, I’ve been contributing about $2,000/month to my 401(k), planning to use the loan option for a home down payment. (I did this to lower my tax liability and because the plan documents explicitly said participant loans were allowed.) When it came time to buy a house, I reached out to HR to ask about the loan process.
HR replied (I have this in writing) basically saying, “Yeah, even though the plan documents say loans are allowed, we don’t actually offer them—we didn’t want to spend money updating the paperwork.” She also referenced something about being able to have a separate policy that could restrict loans, but when I asked her to provide that, she just stopped responding.
Then, about three days later, she sent out what looked like the usual “401(k) open enrollment reminder” email to the whole company, with a new SPD quietly attached. Buried in that new document was the rule change eliminating loans. There was no mention of any change in the email itself, and no warning at all.
So now I’m out the money I could have saved for my down payment, all because I relied on the SPD language and trusted I’d have access to a 401(k) loan like the plan described.
Is this an ERISA violation? I have worked for them for 4 years and they are just super shady and they are so paranoid of getting sued, yet they treat their employees like crap. They are so scared to go to court, they would settle before it ever got there. I oversee all their software and am about to put my notice in, so I deal with their legal team anytime they bring on any new platform, or any of their lawsuits involve the web. They always just settle and refuse to see a court room.
Comments
Did you not approach the plan administrator first about the loan?
Many companies hire a third party to administrator 401K plans, fairly rare to have a company administer its own plan.
Unless you are a union work force plan rules can change without input from the employees.
Your 401k administrator is required to act as a fiduciary “in accordance with the documents and instruments governing the plan.” The plan administrator can change the plan, but not retroactively. So, yes, in this factual universe, that sounds like a violation of ERISA.
You might consider requesting a copy of the loan denial decision in writing, specifying that you requested a loan on X date and ask them to specify the rationale and the plan provision they based their denial on. If they don’t have a good answer, contact the Dept. of Labor ERISA enforcement (or if that is too daunting, it is probably inexpensive to hire an ERISA lawyer to walk you through the steps, and I imagine you can find such a lawyer through your local bar referral service).
That is somewhat complicated, but you have the option of requesting assistance from the U.S. Department of Labor Employee Benefits Security Administration. They are usually very responsive.