Secure 2.0 Act: Big Firms Embrace Student Loan Benefits, Small Businesses Encouraged to Follow Suit
Companies that frequently recruit young professionals are well aware of the financial challenges they face due to student loan debt.
Many large employers are now offering a new benefit that allows employees with student loans to contribute to their 401(k) plans, which is proving to be advantageous. Small businesses may want to consider following suit and hiring Gen Z employees.
The benefit was made possible thanks to the Secure 2.0 Act, which was passed into law in December 2022 and went into effect this January. It introduces several new provisions focused on enhancing retirement savings for workers.
One option enables student loan payments to be considered as contributions to retirement plans, allowing small employers (those with fewer than 100 workers) to match up to $5,250 annually as part of their company 401(k) contributions.
However, it’s not just small businesses that are implementing these benefits. In January, Guardian, an insurance company based in New York City, introduced a new benefit for its 7,700 employees.
This benefit is similar to the one described in Secure 2.0. It allows employees who were previously unable to utilize the company’s 401(k) match to receive contributions from the company while they work on paying down their debt.
“Employers who prioritize their employees’ financial well-being are in a better position to cultivate happier and more productive workforces, while also attracting and retaining top talent,” states Eric Silver, the head of retirement and deferred compensation programs at Guardian.
Although the initial feedback has been favorable, the company emphasizes that it is still too soon to determine the number of employees who will be utilizing the benefit.
Matching Student Loan Payments for Employees
Other major companies also utilize this benefit as a tempting incentive. Last month, Chipotle made a commitment to provide additional benefits to its employees, including matching student loan payments, financial planning assistance, and mental health services.
This initiative aims to attract the necessary 19,000 employees required for the upcoming busy season. “The student loan retirement match will have a significant impact on retirement savings,” states Laurel Taylor, CEO and co-founder of Candidly, a New York City-based student debt and savings platform.
“For employers, this presents a chance to engage with employees who may be facing financial strain, making them less inclined to join a retirement plan and more prone to turnover.”
In October 2023, millions of student loan borrowers were once again obligated to resume making payments after Congress suspended them for an extended period during the pandemic.
Based on data from the Department of Education, the timely payment rate for student loan borrowers was only 60 percent out of the 22 million individuals with payments due by mid-November.
