Loan defaults are a harsh reality with a negative impact on both participants’ retirement readiness and a plan sponsors’ ability to meet fiduciary obligations. Loan defaults deny participants 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. According to Deloitte, leakage from loan defaults is expected to exceed $2 trillion over 10 years, representing approximately $300,000 in lost retirement security to the average participant. Given recent changes to IRS plan sponsor reporting, it’s likely that the Department of Labor and the Internal Revenue Service will step up audits of employer plans with loan default activity.

Retirement Loan Eraser (RLE) is an automated, low-cost retirement readiness program that helps repay a participant’s 401(k) plan loan if they default on their payments due to involuntary job loss. With RLE, they gets to "keep their balance" and their retirement dreams alive.

Money they've worked hard to save is money worth protecting. If they lose their job, they can end up missing loan payments. When they default on their loans, they can lose thousands of future retirement dollars to taxes, penalties, and lost earnings, savings they may not be able to replace. RLE is sensible, low-cost protection, providing a softer landing during what could be a stressful time. With RLE, they get to “keep their balance” and their retirement dreams alive.

For two key reasons: Retirement readiness and fiduciary obligation. Billions of dollars in retirement security evaporate every year, lost to involuntary loan defaults and associated cash-outs. Loan defaults are unnecessary, burdensome, and increase fiduciary risk for a plan sponsor. RLE preserves retirement security and helps plan sponsors meet their fiduciary obligations by preventing involuntary loan defaults.

RLE pays the outstanding loan balance for participants who default on their loans due to disability or death. In the event of involuntary job loss, RLE helps pay the loan while participants look for another job. RLE does not pay benefits for voluntary separation or termination for cause.

RLE is simple, smart financial protection. RLE payments are based on the amount a participant borrows and are included with their loan repayments. If they lose their job, it's easy to initiate a claim online or over the phone. Once a claim is validated, the RLE benefit will begin making loan repayments for a determined amount of time.

RLE is extremely affordable and is based on the amount a participant decides to borrow. RLE protection adds just a few dollars more to a participant’s loan payment.

If you are a plan sponsor interested in offering RLE to your employees, contact the RLE team here.