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If you want to enforce it, go ahead. Maybe the employee will not object, loan payments will continue and life is good. OTOH if the employee objects, what do you do, keep withholding and lawyer up to fight it? Hardly worth the bother. Only consequence of complying with the participant request to stop withholding is taxation to the participant. @My 2 cents - once you start applying some sort of cosmic justice standard to what laws "should" say, you're going to spend a lot of time tilting at windmills. Best go into politics if you want to write laws. But running on a platform of changing the law to prohibit employees from stopping payroll withholding of 401(k) loans is not going to get a lot of traction.

It's an irrevocable pledge and assignment, not an irrevocable promise to continue to pay by payroll deduction.

Honestly, that's the participant's problem, not the plan's or plan sponsor's. Maybe that sounds harsh, but it's still more or less a free country and people are free to make their own choices and decisions, even if they are not necessarily the "best" choices. And who's role is it to determine what is "best" for a given participant in a specific situation? Maybe he or she really needs money NOW for something important and is willing to deal with the consequences later. IRS offers payment plans and in more extreme cases OIC.

I don't know of any state where you can force an employee to deduct the loan payment from wages if they tell you to stop. If you are going to do it, make sure you have a written opinion from an attorney who is specializes in labor law in your state. Honoring the employees request will not result an operational failure for the plan (only a loan default for the EE), why risk a violation of state labor law just to enforce an administrative option of the plan that is not required by ERISA?

Yep, they are fine.