But companies can now help their employees meet these goals. The Secure 2.0 Act went into effect this year, codifying the ability for employers to match workers’ student loan payments with a contribution to their 401(k), 403(b) or other retirement account.
Offering a 401(k) match is a popular benefit: 98% of employers that offer 401(k) plans match some level of employee contributions, according to a 2013 survey of over 400 plan sponsors.
But employees may not be able to afford a retirement contribution, let alone one that earns them the full match, if they’re overburdened with monthly student debt payments.
At least three large employers — Abbott, Verizon and Chipotle — currently offer 401(k) matching for employees making student loan payments. Here’s a look at how each company’s plan works.
Prior to the passage of Secure 2.0, employers were technically allowed to offer matching 401(k) contributions for student loan payments, but there wasn’t a clear legal pathway to do so.
When Abbott, a health-care technology company with over 115,000 employees worldwide, wanted to help its employees struggling with student debt back in 2018, the company had to get special approval from the Internal Revenue Service.
A private letter ruling from the IRS allowed Abbott to create its Freedom 2 Save benefit six years ago, which allows employees who put 2% or more of their salary toward student loans to get a 5% retirement contribution from Abbott. All employees are eligible to participate in the benefit, according to an Abbott representative. Over 2,800 employees have enrolled in Freedom 2 Save since its launch in 2018.
The program helped inspire the Secure 2.0 provision that makes it easier for companies to adopt similar plans to assist their student loan borrower workforces, according to Abbott. The company recently created a blueprint detailing the advantages of offering a student loan repayment benefit and guidance for other organizations to design their own programs.
“We’ve received many inquiries about Freedom 2 Save since launching the program…Interest definitely increased in the past year as people prepared for the approval of SECURE 2.0,” says Mary Moreland, executive vice president of human resources at Abbott. “We’re receiving positive feedback on the blueprint and know that it’s being downloaded by a diverse group of companies across various industries.”
Verizon recently introduced a student loan payment match to help support its employees. Employees who enroll in Verizon’s Secure Your Future program can earn up to a 6% retirement contribution match while paying their student loans.
Employees can get the full 6% retirement contribution match by making their student loan payments, making their own contribution, or a combination of the two, Kevin Cammarata, vice president of benefits at Verizon, tells CNBC Make It.
For example, an employee could put 3% of their annual salary toward their student loans and 3% toward their 401(k) and Verizon will make a 6% retirement contribution on their behalf.
“We really don’t want people missing out on that 6% match for a variety of reasons, the least of which [being that] the best time [to] start saving for retirement is right away,” Cammarata says.
The program launched in December and over 500 employees enrolled on the first day, according to Cammarata. Both full and part-time employees are eligible to sign up as soon as they start working at the company.
“I think [employees] appreciate both the awareness of student loans as a debt burden, but also the flexibility they have so they don’t feel like they have to miss out on this 401(k) match,” he says.
Fast-casual restaurant chain Chipotle also hopped on the student loan retirement match train after Secure 2.0 passed. The company recently announced a new suite of employee benefits, including 401(k) matching for student loan payments.
Chipotle highlighted its young workforce as a contributing factor in its decision to add the new benefit. Over 73% of Chipotle employees are members of Gen Z, the company said in a news release. Chipotle will match up to 4% of an employee’s salary through 401(k) contributions if they are making eligible student loan payments.
“Gen Z has led the charge in reshaping our society’s approach to mental health, while simultaneously being cited as having the most debt,” Ilene Eskenazi, chief human resources officer at Chipotle, told CNBC Make It. “By offering new benefits that support their mental and financial wellbeing, these individuals are more likely to join and grow with us.”
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