At the top of HR lists in 2024: 401(k) match on student loan payments
With the SECURE 2.0 Act here, employers can offer a 401(k) match on student loan payments. And the need may be larger than you think.
“It’s at the top of our list.”
That’s what Kraft-Heinz’s associate director of pensions said in an interview with Pensions&Investments. He was referring to a 401(k) match on student loan payments, one of the 90-plus provisions in the SECURE 2.0 Act.
This optional provision allows for qualified student loan repayments to count as elective deferrals and qualify for 401(k) matching contributions from an employer.
When an employer offers to match student loan contributions into a 401(k), employees can pay down their loans while also taking advantage of their 401(k) match.
A proven benefit
Prior to SECURE 2.0, 401(k) matching your employees’ student loan payments was not an option, but Abbot Laboratories saw a need (and an employee retention tool). In 2018, the IRS approved a request from Abbot to offer this new type of match. One year after launching the program, more than 1,000 Abbott employees had signed up, ranging in age from 20 to 60, proving there was demand for the benefit.
Today, the provision in the SECURE 2.0 Act makes it possible for nearly all employers to offer a similar style benefit.
Is the need greater than we think?
It’s well known that Millennial and Gen-Z employees are often overburdened by student debt, but recent data shows that the need for a 401(k) match on student loan payments may be even greater than we think.
A 2023 report by the National Institute on Retirement Security found that 13% of Gen-X employees (people born from 1965 to 1980) still have student loans, with an average balance of $40,000. The report went on to say, “...those Gen-Xers with student loan debt have lower net worths and are more likely to fall short of their retirement savings targets, at least in part due to student loan debt.”
Knowing what your employees need
As generations age, it will be important for each employer to understand the changing demographics, expectations, and needs of their employee base. If you are trying to attract a college-educated workforce, having relevant benefits in place will make hiring and retention more successful. Also, keeping track of the benefits offered by workforce competitors will allow for more strategic creation of benefits packages.
Our solution for your need
At Betterment at Work, our modern 401(k) platform helps streamline your administrative processes. We’ve designed offering a 401(k) match on student loan payments to be seamless and simple for you and your employees. Your employees simply record their qualified loan payments, and you can approve the match using an easy-to-use dashboard.