Retirement Loan Eraser (RLE) is smart insurance protection that repays your 401(k) plan loan if you default on your payments due to involuntary job loss. With RLE, you get to "keep your balance" and your retirement dreams alive.
Why do I need RLE?
Money you've worked hard to save is money worth protecting. If you lose your job, you can end up missing loan payments. When you default on your loan, you can lose thousands of future retirement dollars to taxes and penalties, savings you may not be able to replace. RLE is sensible, low cost protection during what could be a stressful time. With RLE, you get to keep your balance and your retirement dreams alive.
What does RLE cover?
RLE pays the outstanding loan balance for participants who default on their loans due to involuntary job loss, disability or death. RLE does not pay benefits for voluntary separation or termination for cause.
How does it work?
RLE is simple, smart financial protection. Your RLE payments are based on the amount you borrow and are included with your loan repayments. If you lose your job, it's easy to file a claim online or over the phone. Once your claim is validated, the RLE benefit will restore your full account balance, paying off your outstanding loan.
How much does it cost?
RLE is extremely affordable and is based on the amount you decide to borrow. RLE protection adds just a few dollars more to your loan payment.
Why should employers offer RLE?
Billions of dollars in plan assets evaporate every year, lost to involuntary loan defaults and associated cash outs. Loan defaults are unnecessary, burdensome, and increase risk for a plan sponsor. RLE reduces plan risk and prevents involuntary loan defaults. RLE protection restores a participant's balance, replenishes plan assets, and improves 401(k) outcomes.
Why are 401(k) loan defaults such a serious problem?
Loan defaults are a harsh reality with a negative impact on an employer's level of fiduciary risk, plan assets, and employees’ retirement outcomes. The Department of Labor and the Internal Revenue Service have recently announced plans to step up audits of employer plans with loan default activity. Loan defaults deny employees the opportunity to let their savings grow for retirement. In an all too common scenario, taxes and penalties cause participants to fully cash out their accounts, making it much harder to recapture savings momentum and reach their retirement goals.
How can I get RLE?
If your plan does not offer RLE, talk to your employer. If you are an employer interested in offering RLE to your employees, contact the RLE team here.