If 401(k) loan defaults are not on your radar, the data suggests they need to be.
Deloitte: Loan defaults significantly damage retirement readiness
A groundbreaking study by Deloitte predicted that $2.5 trillion will leak out of the system over the next decade due to 401(k) loan defaults. This staggering number translates to approximately $300,000 in lost retirement savings per participant, when taxes, penalties, and lost returns are factored in.
The IRS stepped up scrutiny of 401(K) loan defaults
Last summer the IRS announced a change to Form 1099-R, the tax form governing distributions from retirement plans and pensions, enabling specific scrutiny of loan defaults by auditors and regulators.
Increasing industry recognition of plan sponsors’ fiduciary obligations
Bloomberg BNA, PLANSPONSOR and PLANADVISER all ran stories about the fiduciary responsibility that plan sponsors have with respect to loans.
And yet another number that’s hard to ignore
According to the Bureau of Labor Statistics, 60,000 people are let go each day in the U.S. This sobering figure means that it’s time to protect American workers from the risks of 401(k) loan defaults and help them “keep their balance”.