DALLAS, Oct. 23, 2018 /PRNewswire/ -- Custodia Financial announced today an expansion of Retirement Loan Eraser (RLE), an automated solution that prevents 401(k) loan default when a participant experiences an involuntary job loss. To address growing losses from loan defaults in retirement plans, the enhanced program, called RLE+, will now help prevent loan defaults for voluntary job changers. RLE+ includes loan repayment services, just in time financial education, and personalized communication to all participants who separate with an outstanding loan, helping more individuals avoid loan default and stay on track for retirement.
Addressing America's $2 Trillion Loan Crisis
According to a new study by Deloitte Consulting LLP, retirement leakage caused by 401(k) loan defaults will exceed $2 trillion over a ten-year period, seriously undermining the retirement security of millions of workers who save through a 401(k) plan. The total impact of this loan leakage includes the cumulative effect of loan defaults at retirement, including taxes, early withdrawal penalties, lost earnings and the early cash out of the defaulting participant's full plan balance. For a typical 401(k) borrower, this represents approximately $300,000 in lost retirement security over a career.
"Extending benefits to more participants is a significant enhancement to the RLE program," says Tod A. Ruble, Chief Executive Officer of Custodia Financial. "The magnitude of hidden losses reported by Deloitte is alarming and should be a wake-up call for the retirement plan industry. Comprehensive loan protection afforded by our new RLE+ program will give sponsors and fiduciaries a highly effective tool to prevent defaults and protect the retirement security of their participants."
Preserving assets for retirement is the primary responsibility of fiduciaries, and Deloitte's study suggests that measures currently taken by plan sponsors to combat leakage such as restricting access to loans, increasing borrowing costs, and adding post-separation repayment options have had limited effectiveness.
Loans are plan investments, and the study results highlight a clear need for increased oversight, as well as greater action by sponsors to adopt effective financial wellness solutions that prevent loan defaults and improve retirement outcomes.
"The good news is that loan leakage is now preventable," said Ruble. "Following the industry success of auto-enrollment, plan sponsors can now make loan insurance a part of their 401(k) plans. Our program -- Retirement Loan Eraser Plus 'RLE+' -- is available now and is the only automated solution that prevents loan defaults and preserves assets for retirement."
About Custodia Financial
Custodia Financial is the financial technology company behind Retirement Loan Eraser™, the innovative program specifically created to improve financial wellness by preventing loan defaults in 401(k) and other defined contribution plans. Retirement Loan Eraser is Custodia's flagship 401(k) loan insurance program and is the first of its kind in the industry designed to automatically prevent the multi-trillion dollar problem of retirement leakage caused by loan defaults.
SOURCE Custodia Financial