The “Freedom 2 Save Program” allows employees to pay off student loans while still obtaining a typical 401(k) match. The program dictates that if an Abbott employee puts at least 2% of pay toward student loans, the company will put 5% of that worker’s pay into a 401(k) account.
Mary Moreland, vice president of compensation and benefits at Abbott, said an employee facing the repayment of a $30,000 student loan debt could wind up accumulating $325,000 less in retirement savings than their debt-free peers, which was a key factor in implementing the program.
Abbott anticipated 2,500 to 3,000 participants at full enrollment and noted that its 401(k) enrollment is around 90%.
Abbott’s program was in response to the IRS private letter ruling in August that helped to clear the way for employers to begin providing student loan repayment benefits as a part of their 401(k) plan.
In response, many employers and industry groups have pushed for legislation that provides comprehensive guidance on how employers can and should structure student loan repayment benefits under their retirement plans, according to the National Law Review. The Retirement Parity for Student Loans Act, if enacted, would do just that.
As of now, the utilization of this kind of plan is still rare. WorldatWork’s 2018 Total Rewards Inventory Program and Practices survey found that 6% of employers surveyed offered a student loan debt repayment program, which was up only slightly from 4% in 2017.
However, considering the tight labor market, it would stand to reason that more employers will provide this as a future benefit. A survey by SoFi found that 95% of professionals younger than 30 with student debt would be more willing to accept a job if it offered student loan repayment.
It will be interesting to monitor the potential proliferation of these student loan debt repayment programs, given their potential as a talent attraction and retention tool.
“Implementing a student loan benefits program reflects a company’s true commitment to supporting its employees and helps organizations stand out amongst the competition,” Leigh Gross, vice president of business development at CommonBond, told Forbes.
Coming soon in the April 2019 issue of Workspan magazine, WorldatWork contributing writer Trisha L. Howard reports on the small but growing number of businesses that are adding student loan assistance programs, saying that they help attract and retain younger workers.
The article, “A Tidal Wave of Debt: Student Loan Assistance Programs Mitigate a Perfect Storm,” discusses several examples including the Step Ahead Student Loan Assistance Program that Fidelity Investments launched in 2016. The Fidelity program provides $167 a month in assistance to eligible employees with a lifetime cap of $10,000. To date, the company reports that more than 9,300 eligible Fidelity employees have taken advantage of the program, with an average savings of $6,200 per person.
The new IRS private letter ruling allows employees to both save and pay off student loan debt.
STUDENT LOAN DEBT ROUNDUP
A Vacation from Debt
Unum announced that beginning it 2020, it will offer a benefit to help its employees tackle student debt. The program will allow U.S. employees to transfer carryover PTO into a payment against student debt, which will be managed by Fidelity Investments. Full-time employees in their first year working at Unum receive 28 PTO days with additional PTO available over time. With the plan, employees can carry over as many as five days of unused paid time.
Legislating Lower Student Debt
In December, Sen. Ron Wyden (D-Ore) introduced the Retirement Parity for Student Loans Act, which would allow employers to make matching contributions under 401(k), 403(b) and savings incentive match plans for employees (SIMPLE plans) with respect to student loan repayments made by employees. Jeffrey M. Holdvogt of the National Law Review writes that the act, if passed, would provide much-needed clarity and guidance for employers considering implementing a student loan repayment program in the future.
The Job Perk of the Future
In a column for Forbes, Laurence Bradford writes that by offering student loan repayment programs, employers can show that they care about their employees’ holistic financial health, both current and future. Bradford provides a comprehensive look at the benefits for both employees and employers to offer programs that assist younger employees with paying off debt.
Fiat Chrysler Automobiles (FCA US) is now offering a way for salaried employees to refinance their student loan debt, reports the Detroit Free Press. Susan Tompor writes that the automaker, whose brands include Ram Trucks, Jeep and Dodge, said it wants to help employees tackle their student debt so they’re better able to save for other things, such as a new home and retirement.
The More the Merrier
Mike Schabel, CEO of Kiswe, a video-streaming startup, began offering student loan debt assistance as way to compete in recruiting talent aagainst tech giants such as Amazon and Google. Schabel is one of many examples that Danielle Paquette of the Washington Post provides in her article about the influx of companies providing this benefit. One executive told Pacquette that he expects the growth to continue if the country’s unemployment maintains its six-month trend of staying below 4%.