Regs Exempting Plan Loans from Disclosure Requirements in Effect

New Federal Reserve regulations exempting most plan loans from federal Truth in Lending Act (TILA) disclosure requirements became effective in July. 

According to an article in Deloitte’s Washington Bulletin, exempted from TILA disclosures as of  July 1, 2010, are participant loans made according to Internal Revenue Service regulations from fully vested funds in a participant’s 401(a), 403(b), or 457(b) account.

When they originally announced the move last year, Fed officials noted that retirement plan loans to participants are substantially different from other loans because there is no third-party creditor imposing finance charges. The interest and principal are also reinvested in the participant’s own account. (see Plan Loans Exempt from Truth-in-Lending Disclosure Requirements).

Deloitte pointed out that plans governed by the Employee Retirement Income Security Act (ERISA) still must include in the summary plan description a disclosure of any fees that may be charged against the participant or beneficiary (or their individual accounts) as a condition to the receipt of benefits. Participant loan fees would fall within this category.