Helping prevent
retirement loan

Retirement loan protection

An automated, low-cost solution that protects against retirement loan defaults.

How it works

Participants with retirement plan loans who experience job loss, disability, or death are at high risk of defaulting. Custodia Financial’s automated, low-cost retirement loan protection product makes loan payments—or in the case of death or disability, pays loans off in full—when participants can’t.

Plus, if participants change jobs while repaying a retirement plan loan, instead of being required to pay the balance in full upon separation, they can continue making payments to Custodia Financial.

Benefits of loan protection



According to a recent study, 62% of employers feel extremely responsible for their employees’ financial wellness.1 Retirement loan protection helps prevent retirement loan defaults, preserving employees’ retirement savings and improving their financial wellness.


Safeguard employees1
retirement savings


Improve financial


Reduce employee

1 SOURCE: Bank of America “Workplace Benefits Report” 2020


With retirement loan protection, participants know they have a backup plan in case something unexpected happens and they can’t pay back the loan.


Prevent retirement
loan defaults


Gain financial


80% of participants

find automated, low-cost loan
insurance appealing,
and 60%
believe their employer
should add it.


67% of participants

say they’d consider
contributing more to
their retirement plan if
their employer added
loan insurance.


70% of participants

report being financially
stressed, and
80% of them
say loan insurance would
reduce their stress.

SOURCE: 2019, Custodia Financial and Greenwald & Associates

Answers to FAQs

Looking for more information about retirement loan protection? We have answers to our most frequently asked questions below.

A loan default is a failure to repay a loan. When participants take out a loan, the money is withdrawn from their retirement savings. In the event of a default, the remaining unpaid amount is considered a distribution and therefore is subject to taxes and penalties for early withdrawal if the borrower is younger than age 59½.

Borrowers can be unable to make payments for any number of reasons, including job loss, disability, or other financial hardships.

A retirement plan loan may seem like an easy way to address a financial setback, but it can have negative ramifications if participants can’t pay it back. In fact, many participants who miss payments and end up defaulting on their loan are also forced to pay the remaining balance in full—derailing their retirement saving progress.

An automated, low-cost financial wellness program, Custodia’s retirement loan protection helps repay participants’ loans if they fall behind after separating from their employer. Here’s how it works:

  • Involuntary job loss: When participants are laid off or lose their jobs unexpectedly, Custodia takes over their loan payments while they search for a new job, preventing loan defaults.
  • Death and disability: If participants pass away or become disabled, Custodia will restore their retirement plan accounts in full.
  • Voluntary job change: Participants who choose to change jobs can continue to repay their loans through Custodia, allowing them to maintain their retirement savings without defaulting on their previous employer’s retirement plan loan.

Once plan sponsors have added retirement loan protection, employees are automatically enrolled in the program when they take out a retirement plan loan unless they choose to opt out.

Retirement loan protection is designed to be affordable, costing participants approximately $2 per month for every $1,000 borrowed. Depending on the program their employer selects, a $5,000 loan could cost a participant as little as $4 per biweekly pay period.

Participants can easily initiate a retirement loan protection claim online or over the phone.

  • Involuntary job loss: Once a claim is validated, Custodia will begin making loan repayments based on their employer’s coverage period as long as they remain out of work.
  • Death and disability: If a participant passes away or becomes disabled, Custodia will restore their retirement plan account in full. Custodia will work with the former employee and beneficiary to reinstate their retirement plan account.
  • Voluntary job change: While Custodia Financial does not pay benefits in the event of voluntary separation or termination for cause, retirement loan protection ensures participants can continue making payments on their loan to Custodia.

Billions of dollars in retirement security are lost every year when participants are forced to pay off their retirement plan loans because of loan defaults, which harms retirement readiness. Retirement loan protection ensures plan sponsors help their employees with financial wellness by preventing unnecessary loan defaults.

Plan sponsors can add retirement loan protection by working with Custodia to establish coverage for their plan and update their loan policy. If you are a plan sponsor interested in retirement plan protection, contact us today.