The Student Loan 401(ok) “Match”

$1,500,000,000,000![1] At $1.5 trillion in excellent loans nationally, chances are high that a lot of your new recruits and present staff are struggling to pay down student loan debt, leading to monetary stress and delayed retirement financial savings. In reality, student loans are so widespread that 4 out of 10 Americans who’ve gone to school took out some type of debt to pursue their diploma.[2]

Recognizing the stress attributable to student loans, employers have began to take motion by introducing progressive new worker advantages, just like the student loan 401(ok) “match”, monetary wellness instruments, and different packages like tuition reimbursement. Dive in to the main points under, and discover the choices to your group.

  1. The Student Loan 401(ok) “Match”:

On June 26, 2018, Abbott Labs introduced a new 401(ok) plan design[3], which permits staff paying off student loan debt to obtain an employer contribution within the plan – with out requiring the worker to avoid wasting to the 401(ok). With its “Freedom 2 Save” Plan, Abbott Labs’ staff don’t have to decide on between paying down student loan debt or saving to the retirement plan to obtain an employer matching contribution. As lengthy as the worker contributes 2% of his or her pay to pay down student loans, the worker will obtain the Abbott contribution to his or her 401(ok) plan account.

The first of its sort, Abbott Labs’ student loan program obtained a non-public letter ruling (PLR) from the IRS on its design. The program is designed to not violate the IRS’ contingent profit rule, which prohibits employers from providing any incentives (aside from true matching contributions) for workers to defer or to not defer into an outlined contribution plan. When a participant repays student loans, the employer “matches” these repayments within the type of a nonelective contribution, which is allotted to the plan after 12 months finish and topic to nondiscrimination testing.

 While tackling the student loan debt dilemma via the 401(ok) plan is a brand new, thrilling, and progressive worker profit, plan sponsors exploring this chance ought to fastidiously consider how such a design would impression their retirement packages. Key issues embody potential price, worker communications, administrative impression, coordination with third get together distributors, impression on nondiscrimination testing and whether or not to request a PLR.

Curious about different methods employers are modernizing their 401(ok) plans? Check out our weblog put up “5 signs your defined contribution retirement plan design is retro”.

  1. Financial Wellbeing Tools:
READ:   Student Loan Consolidation | LendKey

As 3 in 5 employers look to supply monetary evaluation instruments to their workforce, a key consideration within the roll-out of a monetary wellbeing program ought to be addressing student loan debt. As you evaluation monetary evaluation instruments to your staff and as you consider the choices of economic wellness distributors, take into account asking the next questions of your distributors:

  • Do schooling supplies and on-line instruments permit for the modeling of student loan debt?
  • Are staff receiving a personalised expertise tailor-made to their particular person state of affairs?
  • Can the communication technique be designed to spotlight and promote all the wellbeing sources provided by the employer to assist the worker handle student loan debt?

Want extra strategies on excellence in monetary wellness instruments? Check out our ideas within the HR Trove Blog “7 Must-Haves for Your Financial Wellness Tool”. Want to debate monetary wellness and see an instance of a best-in-class monetary wellness software designed round these rising greatest practices? 

Check out myfitAGE and schedule a free demo  

  1. Tuition Reimbursement and Other Programs:

According to Willis Towers Watson’s 2018 Voluntary Benefits Survey, employers want to design packages associated to student loan debt with a purpose to:

  • Deliver a novel attraction and retention software, particularly for millennials
  • Support worker monetary wellbeing and a extra productive workforce
  • Promote the model of the group

Traditionally, the preferred method to perform these methods has been to reimburse the tutoring of these in search of persevering with schooling, with 80% of surveyed employers providing such a program. New and rising packages for sponsors to contemplate embody counseling for student loan refinancing, student loan consolidation, or employer contributions for student loans. More than 20% of employers surveyed are contemplating introducing or enhancing future student loan administration packages as early as 2020.

READ:   Welcome to the Student Loan Ombudsman - Consumers

Has your group thought of the impression that student loans can have on worker efficiency and wellbeing? Keep studying the HR Trove Blog to be taught extra and maintain updated on all the brand new traits.


julievickeryJulie Vickery is a Senior Consulting Actuary at Willis Towers Watson. She helps organizations work out their advantages packages and makes a speciality of retirement profit technique for outlined profit and outlined contribution plans. Outside of labor, Julie loves spending time together with her household, together with her canine Buddy.

DaveDave Amendola is a senior authorized advisor and the North America Intellectual Capital Leader for the Benefits Advisory and Compliance group at Willis Towers Watson. Dave consults with shoppers on governance and compliance issues regarding their retirement plans. When he’s not consulting, Dave, who lives within the Northeast, is a platform tennis fanatic who performs even when the temperature is under freezing.  He insists that that is socially acceptable conduct.