QOTW: Student Loan Matching in 401(k) Plans

QOTW: Student Loan Matching in 401(ok) Plans

This week we requested plan sponsors if they might be excited about offering an identical contribution to their retirement plans for workers who’re making student loan funds if there have been no considerations about non-discrimination testing. This proposed provision within the SECURE Act 2.0 goals to assist workers who’re paying student loans and never capable of contribute to their office retirement plan, and are subsequently lacking out on employer matching contributions. This provision would enable the employer to make the matching contribution to the retirement plan with out the participant making deferrals. There are considerations in regards to the impression this will have on non-discrimination testing and on present secure harbor plans.

About a 3rd of plan sponsors (34.7 %) usually are not on this provision. The responses ranged from the place that retirement plans ought to stay centered on serving to members save for retirement and never used to unravel the student loan debt drawback, to corporations who shouldn’t have many workers with student loans, to corporations who’re offering student loan help in different methods.

Another third (33.9 %) of plan sponsors have an interest on this provision and customarily assume that this may be a good way to draw workers and assist deal with a rising concern.

About thirty % (31.4 %) of plan sponsors are uncertain right now – many acknowledged that they’re however have considerations in regards to the impression on secure harbor plans, different regulatory considerations, and considerations in regards to the administrative complexities.
 

Comments from these with no real interest in this provision:

  • The goal of the 401(ok) plan is for the participant to avoid wasting for his or her retirement.  If you begin matching on cash that goes to student loans, what different sources of debt ought to now be included as effectively.
  • The administration of that is extraordinarily sophisticated and would require extra assets than at present out there.
  • We have an older workforce in addition to largely laborers that shouldn’t have private student loans.
  • At current, we do not have a big sufficient inhabitants requiring this profit to make it value/helpful to manage.  If that may change sooner or later, we’d rethink.
  • Our workers are largely Hispanic. Due to cultural and financial variables, most of our work drive is blue collared and have not gone to school to build up student loans. Many of their youngsters go to Junior Colleges after which on the state faculties the place tuition will not be like Ivy League tuitions. Many of their youngsters work extremely laborious to garner both a scholastic or educational scholarship or athletic scholarship. Owing cash to the federal government will not be viable various.
  • We have a tuition reimbursement program in place.
  • Our plan is Safe Harbor – We do NO different match.
  • Focus ought to be on discovering methods to decrease school prices, not proceed the student debt development and points.
  • We shouldn’t be putting any ethical hazards into 401(ok) Plans or DC Plans.  The Plan loans are unhealthy sufficient already.
  • Not doubtless as a consequence of our plan being fairly beneficiant to start with.
  • Not on the precedence off points we’re coping with.
  • We do not use a match system within the 401(ok); we do a every year discretionary firm contribution.  We even have a tuition reimbursement program in place.
  • Our govt workforce will not be excited about providing student loan help.
  • Our plan is a voluntary 401(ok) plan that is supplemental to a compulsory outlined profit plan. It’s additionally a multi-employer plan, with greater than 800 employers taking part. An worker matching association can be at particular person employer’s discretion. The plan doc would additionally must be amended to permit for this. So far, no employers have expressed curiosity on this function.
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Comments from those that have an interest:

  • We have an interest however there must be a value profit to the group to assist with student loan repayments.
  • We can be keen to match as much as 6% of annual wage towards qualifying student loan repayments.
  • Exploring now.
  • Would add to the rising concern of student debt and support in attraction / retention efforts.
  • We want to discover this selection. We are involved in regards to the look of solely benefiting workers which have remaining debt, vs. those who discovered a strategy to pay for it already.
  • We can be very excited about providing the match on student loan repayments.
  • We already pay $300 per thirty days to assist workers repay student loans. We have to cease merely forgiving them and encourage inventive methods to incentivize their compensation with out sticking our debt to future generations!
  • This might be a big strategy to entice expertise and scale back a nationwide concern.
  • We make use of many extremely educated workers the place the student loan matching program can be an incredible profit.  As a small employer of lower than 50 workers, packages with extreme administration or begin up effort aren’t possible.
  • Good for recruiting however laborious to implement
  • We must have a look at this rigorously as a result of placing cash in a 401k earns tax deferred. While student loan matching would lower a debt it could be of much less worth than growing the match to the 401k. However you’re serving to the individual within the current verses future.
  • Definitely make this extra attention-grabbing and it bridges the considerations of funds vs 401k deferrals.
  • a lot wanted
  • Safe Harbor plan restrictions have to be addressed.
  • We can be excited about redirecting firm match to 401k deferral to loan cost, not a brand new matching contribution for cost made by worker.
     
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Comments from sponsors who’re uncertain right now:

  • This is one we might need extra element of administering and possibly watch others do it for some time earlier than contemplating significantly.
  • Since we’re a authorities entity, laws would have to be handed associated to creating student loan repayments.
  • Not contemplating now.  Would have to know extra in regards to the recordkeeping implementation of such a program and associated regulatory guidelines.
  • Not actually positive what this implies or what it could appear to be.
  • We are a church denomination that features like a MEP.  Decisions just like the one above is dealt with on church degree and never by the denomination.  Anecdotally, I do know some church buildings want to provide matching contributions primarily based on school or seminary loan repayments.  If this turns into a chance for 403(b)s, we are going to take a look at the waters…..
  • Our agency doesn’t provide and isn’t excited about providing student loan help. I believe they might see this as a means of providing that help and would like to maintain retirement plan matching separate.
  • I’m in favor of matching as much as the equal of a DC contribution max for student loans, nonetheless, I’m solely in control of investments and it is a HR advantages plan design matter.
  • Possibly! We are at present designing a student loan help program, and a few workers are excited about a match/401k element…
  • Our plan is conventional safeharbor so though it sounds nice, it could not work for our plan.
  • While there’s a profit to saving for retirement, the quantity an employer would contribute can be miniscule and never be helpful to workers.  You must regulate payment schedules, funding choices, and so forth. to make this helpful to the worker and employer.
  • I might have an interest.  I’m unsure how our committee feels about it.
  • This can be an attention-grabbing choice to encourage workers to repay this debt but additionally assist them proceed to make progress on their retirement financial savings. I’m not the choice maker, although, so whereas it is attention-grabbing to me, I’m unsure what our govt committee would select to do.
  • I do not know if our workers would worth this profit.  I query what number of of our workers are nonetheless paying again their student loans.  Would it depend in the event that they had been paying their kid’s student loan that they’d co-signed on?
  • We have an interest however have not decided if we wish to make it an choice
  • Amount of required documentation, reporting and {qualifications} would affect curiosity even when there have been no points with non-discrimination.
  • Our match will not be assured however decided yearly.  It would depend upon how the student loan compensation is structured.
  • We have not had a lot dialogue about this but. I might be in favor and would make a advice to the Plan Administration Committee if it did not have an effect on non-discrimination testing.
  • We are making use of CARES Act permitting us to exclude as much as $5,250 of academic help the employer supplies to an worker below an academic help program from the worker’s wages every year.   As such, I don’t assume we’d additionally provide matching contributions to 401K primarily based on qualifying student loan repayments.   IE: we’re already serving to our workers pay student loans.
  • Would want extra data on the price, administration, and compliance necessities earlier than we might make a dedication.
  • This query conflates 401k matches and student loan repayments.  Two separate subjects.  I’m not positive what’s being requested.
  • Interested provided that the match is NOT along with an employer match that’s directed to the retirement plan.
  • Our group has not began conversations relating to this but however I anticipate it to be forthcoming. Personally, I would like so as to add, if no points with testing.
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