When I read that Securian Financial is joining forces with Custodia Financial to bring their “Retirement Loan Protection” (RLP) program into more in-plan offerings, I immediately thought about how many times I’ve seen plan participants unintentionally derail their financial futures over a small 401(k) loan.
This announcement isn’t just another corporate partnership—it’s a signal that the retirement industry is finally acknowledging a problem we’ve all known about for years: participants borrowing against their futures and then losing twice when they can’t repay those loans.
What’s the Deal
Securian and Custodia announced a strategic relationship under which Securian will integrate Custodia’s patented Retirement Loan Protection program into more workplace retirement plans. The program protects 401(k) loans from default if participants lose their jobs, become disabled, or pass away. The goal is to reduce loan defaults and prevent unnecessary cash-outs, which together have created a massive drain on retirement savings—an estimated $2 trillion gap nationwide.
Why It Matters
1. Fiduciary Risk Recognition For years, I’ve warned plan sponsors that loan defaults are the leak nobody talks about. You can have great fund lineups, low fees, and compliant disclosures—but when participants leave their jobs and their loan becomes taxable income, that’s a permanent loss of savings. This partnership acknowledges that issue and offers an in-plan way to protect against it.
2. Reinforcing the Promise of Retirement A retirement plan isn’t just a benefit—it’s a promise. Too often, participants borrow because they have to, not because they want to. This program helps preserve that promise when life takes a bad turn. Securian’s involvement gives it legitimacy, and it signals that the market is shifting from “we hope participants repay” to “we’ll design to protect them if they can’t.”
3. Implementation Realities Execution will matter. Will employers make RLP an opt-in benefit or automatically apply it to new loans? How will costs be handled? Will participants understand it’s insurance against default, not a free loan forgiveness program? Like every new benefit, the success will depend on communication and administration.
The Caveats
· The protection only applies in certain circumstances—job loss, disability, or death. Voluntary quitters might not be covered.
· There will be costs and possible vendor-integration issues. Plan sponsors must evaluate whether it’s worth the expense.
· It doesn’t fix the underlying behavior. Borrowing from your retirement account is still a bad idea unless absolutely necessary. This is protection, not permission.
My Advice to Plan Sponsors
· Audit your loan defaults. Know your numbers—how many loans default annually and what the long-term impact is on participants.
· Document the decision. Whether you adopt the RLP or not, document your fiduciary process.
· Communicate clearly. If you implement it, create a short, simple explainer. Don’t bury it in legal language.
· Coordinate with your record-keeper and advisor. Make sure they understand how it fits into your plan’s operations and disclosures.
· Encourage minimal borrowing. Even with protection, participants should borrow only as a last resort. Education still matters.
A Word to the Next Generation
To anyone just starting their career: your 401(k) is supposed to be your future, not your emergency fund. Programs like RLP help protect you when life blindsides you—but the best protection is not needing one in the first place. Build habits that make borrowing unnecessary. The market is finally catching up to reality, but discipline will always be your best insurance.
This partnership between Securian and Custodia is a smart, needed move. It doesn’t solve every problem, but it plugs a costly leak. And for once, it feels like an innovation that actually helps the people the plan is meant to protect.
