The Secure Act 2.0, passed in December 2022, introduced significant changes to retirement savings, including a groundbreaking provision: student loan repayment benefits. This new benefit allows employers to help employees with student loans while simultaneously contributing to their retirement savings. In a time when young professionals are entering the workforce with historically high levels of student debt, this provision addresses a major pain point for many employees.

In this article, we'll explore what this new student loan benefit means for employers, why companies are offering and how they can implement it. We’ll also offer key considerations for employers, examples of companies already providing this perk, and why it’s a valuable tool for recruiting and retaining top young talent.

What Is the Student Loan Benefit Under Secure Act 2.0?

The Secure Act 2.0 allows employers to treat an employee's student loan payments as if they were retirement contributions for the purposes of matching contributions to a 401(k), 403(b), or SIMPLE IRA plan. In other words, when employees make payments toward their student loans, employers can "match" those payments by making equivalent contributions to the employee's retirement plan.

This is a major development for workers struggling to save for retirement while paying off student loans. Prior to this provision, employees either had to prioritize paying off debt or contributing to retirement savings, with many feeling unable to do both. Now, they can do both simultaneously, giving them a financial leg up early in their careers.

Why Are Companies Offering This Benefit?

Employers are increasingly recognizing that financial wellness is a critical factor in employee satisfaction and productivity. Student loan debt is a significant source of financial stress for many workers, especially younger employees. According to the Federal Reserve, in 2022, 30% of all adults who attended college still had student loan debt. For employees in the 18-29 age range, this figure is even higher.

By offering this student loan benefit, companies can help alleviate some of the financial burden on employees, which in turn leads to a happier, more engaged workforce. Studies have shown that financial stress negatively impacts employee productivity, and alleviating this stress can lead to improvements in job performance and morale.

Additionally, offering a benefit like this can set companies apart in the increasingly competitive job market. Many young professionals consider student loan repayment assistance a key factor when choosing an employer. In a 2021 survey by TIAA, 84% of employees aged 21-64 said they would prioritize working for an employer who offers student loan repayment benefits over one that doesn’t. This indicates a growing demand for student loan assistance as part of a comprehensive benefits package.

How to Offer the Secure Act 2.0 Student Loan Benefit

For employers looking to implement this benefit, the process begins with understanding the IRS guidelines. The employer must:

1. Determine Matching Contribution Limits: The employer can match the amount of an employee's student loan payments, up to the maximum allowed for 401(k) contributions.
2. Verify Employee Payments: Employees will need to provide proof of their student loan payments in order for the employer to contribute to their retirement account.
3. Align with Existing Retirement Plans: Employers need to ensure that their retirement plan providers can accommodate these types of matching contributions. It may require working with plan administrators or making adjustments to existing plans to enable this benefit.
4. Communicate Clearly with Employees: Clear communication is essential to ensure employees understand how the benefit works, how they can take advantage of it, and what documentation they need to provide.

Employers may also want to seek legal counsel to ensure compliance with IRS regulations and avoid any potential penalties.

Key Considerations for Offering This Benefit

While the student loan benefit presents an exciting opportunity for both employers and employees, there are several factors to keep in mind:

• Administration Complexity: Ensuring that employee contributions and student loan payments are properly tracked can be complex, especially for larger organizations. Employers may need to invest in administrative support or partner with financial services companies that specialize in this area.
• Legal and Regulatory Compliance: Employers must carefully adhere to IRS rules and other legal requirements when setting up this benefit. Non-compliance can result in fines and penalties.
• Cost: Matching contributions for employees' student loan payments can increase an organization's overall compensation costs. Employers should evaluate their budget and determine how many employees are likely to take advantage of the benefit before offering it company-wide.
• Attractiveness to Employees: Before implementing this benefit, employers should assess whether it aligns with their workforce's needs. If a large portion of the employee base is older or already debt-free, it may not be as appealing.

Thrive offers a Secure Act 2.0 program which takes the work off of the employer's plate. Thrive’s Secure Act program alleviates that audit and match calculation process – two major administrative burdens in offering the Secure Act 2.0 benefit.

Companies Offering the Secure Act 2.0 Student Loan Benefit

Several forward-thinking companies have already started offering student loan repayment benefits, even before the Secure Act 2.0 made it easier to incorporate them into retirement plans.

• PwC: PricewaterhouseCoopers began offering a student loan repayment benefit in 2016, providing employees up to $1,200 per year toward their loans.
• Fidelity Investments: Fidelity has offered a similar program, contributing up to $10,000 over five years for employees paying off student loans.
• AbbVie: The pharmaceutical company introduced a benefit that pays up to $1,500 a year toward employees' student debt.

As the Secure Act 2.0 expands access to this type of benefit, it’s likely that more companies will follow suit, making it an increasingly common feature in corporate benefits packages.

Why This Benefit Will Help Attract and Retain Young Talent

The current job market is highly competitive, especially when it comes to attracting young talent. Millennials and Gen Z employees, who make up the majority of today’s workforce, are particularly burdened by student loan debt. The Federal Reserve reports that outstanding student loan debt in the U.S. totals over $1.7 trillion, with the average borrower owing about $37,000. For younger employees, this financial strain can make it difficult to save for retirement or make other important life investments.

Offering a student loan repayment benefit can significantly enhance a company’s appeal to younger job candidates. This benefit directly addresses one of their most pressing financial concerns, signaling that the company understands their needs and is invested in their long-term financial well-being.

In terms of retention, financial benefits tied to loan repayment can build loyalty among employees. When companies help workers get out of debt and build financial security, it fosters a sense of goodwill and appreciation, making employees more likely to stay. Research from the Society for Human Resource Management (SHRM) found that 86% of employees who receive student loan repayment benefits report feeling more loyal to their employer.

Conclusion

The Secure Act 2.0’s student loan benefit is a game-changer for both employees and employers. It allows companies to address one of the most significant financial burdens faced by younger workers—student loan debt—while also helping them save for retirement. As this benefit becomes more widespread, it has the potential to transform the way companies attract and retain talent, especially among younger generations.

Employers who are early adopters of this benefit will likely find themselves in a stronger position to recruit top talent and foster long-term employee loyalty. In a competitive job market, offering innovative financial wellness benefits like student loan repayment assistance can make all the difference. If you’re interested in learning more about how to offer a Student Loan Benefit, contact our team at thrivematching.com