For employers, a significant factor in helping 401(k) plan participants achieve retirement readiness is protecting them from themselves. In other words, it’s about helping participants avoid making bad decisions. An important component of that process is minimizing the loss of participant account balances from loan defaults.

Also called leakage, defaulted loan balances are typically removed from participant retirement accounts forever. This account leakage can be reduced by a well-designed 401(k) loan program. A state-of-the-art loan program has the following characteristics:

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