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It would be a breach of fiduciary duty to loan more money to someone with a history of not repaying his/her obligations. But there are no guarantees that any loan will be repaid pursuant to the terms. Again, why should the Plan enjoy greater enforceability rights than any commercial institution? Recall that a plan COULD allow for payments by check, but is not required to do so. So because payment could have been by check, the answer to your question must be "of course it would not be a breach of fiduciary duty." What you are referring to is a code for a garnishment, is it not?

I am of the opinion that even though permission was granted withhold loan payments the authorization was not irrevocable. So if an employee comes to you and says "I forbid you to withhold money from my pay for this loan payment" what basis would a plan administrator have for refusing to honor this request? Especially if the employee's pay was cut in half due to an hours cut. Now of course the fiduciary should never make another loan to this person unless the old is repaid (even if defaulted of course!). But to me if you refuse to discontinue the payroll deductions now it is a garnishment. Why should the plan have such an advantage over a bank who has to get a court order to garnish wages?