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 repays a participant’s 401(k) plan loan if she defaults on her payments due to involuntary job loss. With RLE, she gets to "keep her balance" and her 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 involuntary job loss, disability or death. 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 her loan repayments. If she loses her job, it's easy to file a claim online or over the phone. Once her claim is validated, the RLE benefit will restore her full account balance, paying off her outstanding loan.

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. Industry-specific pricing is now available.

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