You know that problem with 401(k) plan loan leakage?

We solved it.

“ The impact of a 401(k) loan default is immediate, but is merely the tip of the iceberg.” – Thomas Schendt, ERISA Attorney

To learn more about RLE, call 844-SAFE-RLE or visit loaneraser.com

Retirement plan loans aren’t going away.

Without the right protection, neither is the risk.

Loans are an essential and popular feature of 401(k) programs and highly valued by participants. Yet loans are not problem-free. Billions of dollars in plan assets evaporate every year, lost to involuntary loan defaults and associated cash outs, especially when employees lose their jobs in layoffs or become disabled. The vast majority of loan defaults go unreported because they are not separately detailed on the Federal Tax Form 5500.

Loan defaults are unnecessary, burdensome, and increase risk for you as a plan sponsor. But it doesn’t have to be that way.

We’re not just talking about the leakage problem. We’re solving it.

Loan defaults are constantly discussed and lamented in the industry, but until now no one has offered an effective solution to this pervasive problem. Now you can mitigate your risk with a participant-paid, compliant solution that plugs the leak caused by loan defaults: Retirement Loan Eraser™(RLE). It’s the smart, proactive way to protect your plan against repayment problems in the future.

DEFAULT BY THE NUMBERS

86%of 401(k) loans

default when people

lose their jobs and

are unable to repay

their loans.

$6 billion in loans default

annually, exclusive of

cash outs.

An estimated

65–75% of participants cash out

their entire account

balance when they

default on their loans.

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Source: “Borrowing From The Future: 401(k) Plan Loans and Loan Defaults”, Wharton School, University of Pennsylvania, February 2014

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Plan sponsors are not immune to loan default risk.

As a plan sponsor, you have a fiduciary obligation to preserve 401(k) retirement benefits for plan participants. ERISA 29 CFR 2550.408b-1(d)(vii) requires you to preserve plan assets in the event of a loan default.

Involuntary loan defaults are an all-too-common occurrence after layoffs. While layoffs are difficult, employers have seemed immune to worries over any loan defaults and loss of their participants’ retirement assets. Their reasoning? If loans are properly secured by a participant’s account balance, isn’t that enough?

Not according to noted ERISA attorney Thomas Schendt of Alston & Bird. According to Schendt, that assumption falsely relies on the premise that offsetting an outstanding loan balance with the so-called “adequate security” also satisfies the need to preserve

a retirement benefit. “It is clear that the collateral of adequate security does not satisfy all fiduciary requirements,” Schendt says.

The Internal Revenue Service (IRS) and Department of Labor (DOL) require a plan to document and “provide effective collection efforts following a default.” Yet loan collection efforts rarely yield positive results, and create a cost and administrative burden. What’s more, loan defaults cause unwanted attention: Both the DOL and the IRS intend to step up audits of plans with loan default activity.

Bottom line: Loan defaults create unnecessary fiduciary risk, reduce your plan assets, and harm your employees’ retirement prospects.

Now you can lower your risk and improve outcomes with a simple and elegant solution — Retirement Loan EraserTM

RLE is guaranteed-issue loan insurance that prevents 401(k) loan defaults and full cash outs. RLE restores a participant’s balance, replenishes plan assets, and improves retirement outcomes.

We created RLE to offer basic loan protection that’s both easy to implement and deliver. For plan sponsors, RLE is a painless, simple adoption with no plan amendments needed.

DID YOU KNOW?

20%of participants have

outstanding loans.

50%of participants

take loans over a

seven-year period.

Loans improveparticipation and

contribution rates.

401(k) loans

cost less than

a typical

consumer loan.

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1Participant

borrows with RLE coverage.

2Loan payment

begins.

3Participant misses loan

payment after involuntary

job loss.

RLE says goodbye to loan defaults.

RLE is the only solution of its kind, offering a fresh new approach to lowering risk:

• Automates financial wellness. RLE is an effective financial wellness strategy that solves for loan defaults before they happen.

• Easily implemented. RLE is designed specifically for defined contribution plans and easy integration with existing recordkeeping systems.

• Participant-paid with after-tax payroll contributions. RLE gives you a no-cost way to enhance your program and offer sensible, low cost protection to your participants.

• Fully regulatory and tax compliant. RLE addresses all ERISA and fiduciary requirements.

How Retirement Loan Eraser works.

Brilliant in its simplicity, RLE prevents loan defaults before they occur.

The benefits of Retirement Loan Eraser.

FOR YOU

Limits fiduciary exposure. RLE enhances a fiduciary’s ability to satisfy the regulatory loan requirements, lowers audit risk, and reduces the administrative burden of defaulted loan collections.

No cost to your company. RLE coverage is paid entirely by the borrower.

Quick, simple adoption. Adopting RLE is a simple business decision and easily implemented. No plan amendments are necessary.

Valuable insurance protection. RLE offers guaranteed-issue, universal coverage from an “A rated Class XV” carrier without individual underwriting.

FOR YOUR PARTICIPANTS

Improves retirement outcomes. RLE prevents loan defaults before they happen. Borrowers “keep their balance” and continue to enjoy decades of compounding in their accounts.

Promotes financial wellness. When participants face financial emergencies they often tap their retirement plan for funds, not realizing the future impact of their actions.

Affordable. RLE protection adds just a few dollars more to an employee’s regular loan payments.

4Account balance is restored with

cash. Loan default and cash out are

prevented.

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Money they’ve worked hard to save is money worth protecting. When participants face a financial struggle, they often turn to the “loan of last resort” — borrowing from their retirement plan. While they’ve worked hard to save, they may not make the connection that it’s money worth protecting.

Economic stress can make it difficult to appreciate the future impact of current actions or the repercussions of a potential loan default on their overall financial wellbeing. At a minimum, a loan default

denies your employees the opportunity to let their savings grow. What’s more, taxes and penalties can drive them to fully cash out their plan, making it much harder to recapture savings momentum and reach their retirement goals.

RLE safeguards participants now — and can maintain their balance for the future. With RLE coverage in place, your plan participants “keep their balance” and their retirement dreams alive.

How a protected loan improves participant outcomesMaria, 30 years old, borrows $4,600 (median U.S. loan) from her 401(k) plan to pay emergency medical expenses, but then she loses her job. The chart below shows the impact on Maria without RLE protection in place. Without RLE, Maria could default on her loan, losing years of compounding and lowering her retirement savings potential. She would stand to lose $71,361

in retirement savings over the course of her career, money she can never get back (shown in gray).

Even worse, if Maria were to cash out her remaining account balance, as many who default on their loans do, she would lose out on a total of $281,143 in savings at retirement (shown in orange). RLE would protect that $281,143 in retirement savings, allowing Maria to keep her balance and improve her potential retirement outcome.

To learn more about RLE,

call 844-SAFE-RLE or visit loaneraser.com

Work with the industry innovatorsRetirement Loan Eraser is the flagship, patented product from Custodia Financial, a company formed by

thought leaders from some of the country’s top financial institutions. RLE insurance is backed by an “A rated” insurance provider.

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