Are you allowed to add a loan provision to a cash balance plan?

Yes, but as a DB plan, the loan is a general asset of the trust, and not from the participant's account. Still the usual limits.

Yes but the employee must put up collateral for the loan since the the employee has no account holding assets in the plan to secure the loan.

The collateral is their vested account balance. Am I missing something?

Yes. In a CB plan there is no individual vested account balance under IRC 414(i) in which the participant's benefits are based solely on the amount contributed to the participant's account as there is in a DC plan. The CB "account balance" is strictly notional under ERISA and the IRC.

My recollection is that problem has someting to do with the adequate security requirement under the DOL loan regs since there are no assets individually credited to the employee in a DB plan which can be used as collateral for the loan because the "accrued benefit" is not an asset that can be foreclosed upon or disposed of upon default of payment of the loan as required in reg 2550.408b-1(f). If there is authority to the contrary I would be interested in seeing it.

You must practice law differently than most document providers.

Here is an excerpt from the Relius DB Document loan instructions from GUST:

52. LOANS TO PARTICIPANTS.....
Generally, ERISA §408(b)(1) permits loans to be made to participants and beneficiaries as an exception to the
“prohibited transaction” rules, provided that there is a loan program that satisfies certain specific criteria.
Loans must be made available to all participants and beneficiaries on a reasonably equivalent basis. The DOL
has indicated that a loan program limited to “parties in interest” will avoid the necessity of making loans
available to most terminated or retired participants. Loans must be adequately secured. For this purpose, the
participant’s accrued benefit may serve as adequate security, provided that not more than 50% of the vested
interest at the time the loan is originated is used as security.

But is the DB accrued benefit a security interest permitted under the DOL regs? I am assuming that the DOL reg provisions are not included as part of the IRS approval process and further this excerpt is only instructions. All I am saying is caveat emptor.

Law practicing document provider - I generally call that an oxymoron.

Interesting observation about Brucker, Shardlow, Hochman and a few others. But, perhaps your experience is different.

Frankly, I am amazed that this very settled area of law has any confusion at all. DB plans have been allowing participant loans for a long time, well before the restrictions of the 1980's hit. Vested Account Balance has been the common standard for these as well.

One of those listed has late retirement provisions in their document that are so ambigious they are unworkable or illegal. I have spoken to them several times about it and they have admitted the provisions don’t really comply with the law - after I pointed out the applicable provisions of the law. When I ask them how we are supposed to interpret the language so we can do a ben calc they told me they would check with their actuary friends and get back to me. Seems to me if they wrote the document they should understand what it means, not asking their actuary friends to interpret what they wrote for them.

Anyway, just one example. I'm not big on canned documents because often the subtle stuff no one reads ends up costing the clients 10X what they saved. Plus my experience is that you generally get very little help from the providers on anything even remotely technical. But hey, that’s just me. Maybe those guys are your friends so they will actually call you back.