Posted on: August 30, 2023
With more than 43 million borrowers – or one in eight Americans – heading back into repayment for the first time since March 2020, juggling student loan debt with saving for retirement is a major financial stressor for employees of all generations.1 That includes the 7 million borrowers under age 24 who hadn’t made their first student loan payment when the payment pause began – all the way up to the youngest baby boomers who may be paying on their own, their children’s, or grandchildren’s student loans while they hope to soon retire.1
The Setting Every Community Up for Retirement Enhancement (SECURE) Act 2.0 added 92 new provisions to the SECURE Act of 2019, designed to help improve retirement savings opportunities, offer more flexibility to employees across a wide range of situations in saving for retirement, and boost incentives for employers.
Section 110 Helps Employees With Student Loan Debt
Section 110 of SECURE Act 2.0 allows employees with student loan debt to receive employer matching contributions by using student loan repayment as a qualification for company matching contributions. Effective for retirement plan years beginning after December 31, 2023, this provision allows employers to make a change to their retirement plan to recognize employees’ student loan payments as qualifying contributions to their retirement plan.
Over the past several months, many articles directed at employees have surfaced to offer them email templates and suggestions for asking potential or current employers in interviews about their plans to implement this provision of SECURE Act 2.0 in their retirement program for 2024. Employees are paying close attention to this because it matters to them.
For employees who struggle to find money in their budget to make student loan payments and contribute to their retirement plan, they’re able to benefit from employer match dollars in their retirement account and the additional interest they’ll earn over time on those retirement contributions. This optional benefit is particularly valuable to younger employees who haven’t been able to afford to start contributing to their retirement plan. While there are no guarantees about market predictions, we do know the value of compounding interest – and being able to save early is always better than not.
How Employers Can Adjust Their Retirement Plan
Other provisions of SECURE Act 2.0 that employers must accommodate will require administrative work, making implementation of optional provisions a challenge for certain employers that aren’t positioned for the additional work. If that’s the case, benefits administrators like BenefitEd can help handle the administration work to help these employers adapt their plans to recognize student loan payments as eligible contributions and help their employees start benefitting from employer match dollars.
There are different ways to set the plan up. For example, employers can set up automatic payroll deductions for student loan payments – or have employees submit documentation for their student loan payments. In the first case, it may be easier to ensure that the match occurs each month without the need for the employee to take action.
Consider the Importance of Being There for Employees Now
However employers go about setting up student loan repayment match – on their own or with the help of a benefits administrator, with payroll deduction or employee documentation – it’s important to consider the significant relief they can offer to employees who may be struggling at this time. It’s also worth noting that today’s savvy employees are fully aware of the new SECURE Act 2.0 provision. If they’re financially strapped and concerned about their financial future, they may make a decision for their future to go where they feel an employer is supporting their long-term financial well-being.
To learn more about how BenefitEd can support you in adapting your retirement benefits to Section 110 and other SECURE Act 2.0 provisions, or to learn more about our education benefits, contact us today.