The Sarbanes-Oxley Act of 2002 prohibits personal loans from a public company to any of its directors or executive officers, but it is not clear whether this prohibition extends to participant loans from qualified plans. This has created a problem for plan administrators, because the Sarbanes-Oxley loan prohibition conflicts with the ERISA rule that plan loans be made available to all participants and beneficiaries on a reasonably equivalent basis. The Securities and Exchange Commission, which has the authority to interpret Sarbanes-Oxley, has given no indication that it will provide guidance on the retirement plan loan issue in the near future.

Recognizing the problem this issue creates for plan administrators, the Department of Labor issued Field Assistance Bulletin 2003-1 on April 15, 2003. The Bulletin allows plan administrators to refuse a participant loan for a director or executive officer if there is a reasonable question about whether the loan would be prohibited under Sarbanes-Oxley. This is a welcome development for retirement plan sponsors and administrators. However, before implementing any changes to its loan procedures a plan sponsor should review plan documents and consult with counsel to confirm whether written amendments to the plan or the plan loan policies would be required.