Is it true that plans may restrict how often employees can change their deferral elections?

Plans can indeed impose restrictions on how frequently employees are permitted to change their deferral elections, making the statement true. This is often done to maintain the operational integrity of the plan and encourage long-term saving habits among participants.

For example, many 401(k) plans may limit changes to deferral elections to certain intervals, such as quarterly or annually, to avoid excessive administrative burdens from constant changes. These restrictions are also based on regulations and plan design to ensure that participants do not make impulsive changes that could disrupt the plan’s investment strategy or undermine the goals for retirement savings.

There are no necessity-based distinctions made for specific employee demographics, such as high earners or certain types of plans, since the ability to restrict changes is applicable broadly within a plan's defined framework. Thus, the answer accurately reflects the nature of 401(k) plans and how they manage participant contributions.