How SECURE Act 2.0 Will Help You and Your Employees

Posted on: January 23, 2024

Approximately 45 million Americans owe nearly $1.78 trillion in student loan debt.1 The latest available data also shows that 3.7 million parent borrowers owe an average of $29,081 in federal parent PLUS loans.1 According to Experian data, the average monthly payment was $203 for federal student loan borrowers returning to repayment in October 2023, with interest starting to accrue in September.

Student Loan Debt 20231

45 Million Americans Owe $1.78 Trillion

Average Student Loan Payment2

$203/Month For Federal Borrowers Returning To Repayment in October 2023

In an economic environment including inflation and high interest rates on credit cards and other loans, adding a new monthly bill for consumers—regardless of their stage of life—adds a new financial stressor. Experian data shows that Millennials carry nearly half the outstanding student loan debt in 2023, but all generations are impacted.2 These statistics all paint a picture of Americans in various life stages who juggle student loan repayment while trying to plan for retirement.

Pie chart showing Millennials 46.6%, Generation Z 8.2%, Baby boomers and older 14.9%, and Generation X 30.3%
Source: Experian data as of Q3 2022

In fact, research from the Federal Reserve showed that one-quarter of employed Americans have no retirement savings. A Fidelity Investments 2020 Student Debt Snapshot study analyzed data from nearly 60,000 users of their Student Debt Tool, examining the correlation between student loan debt and retirement saving. It found:

  • 18% of users reported contributing nothing to retirement.
  • 22% reported contributing just 1.5% of their salary to their 401(k).
  • 23% said they had an outstanding loan against their 401(k).

The stress of juggling completing financial priorities takes a toll on physical, mental, and emotional health, as well as employee productivity—and these issues are particularly pronounced for student loan borrowers. Employers who assist employees in saving for retirement can also benefit.

The Setting Every Community Up for Retirement Enhancement (SECURE) Act 2.0 strengthens retirement plans while making it easier for more Americans to participate in them and for employers to administer them. Most importantly, SECURE Act 2.0 allows employees to focus on paying down student debt while they save for retirement.

More employees—even those with student loan debt—can save for retirement.

These provisions of the SECURE Act 2.0 boost overall retirement plan participation and make it easier for particular groups that have struggled to save for retirement to do so.

  • Automatic enrollment is required for certain employers with 401(k) or 403(b) plans. (Employees can choose to opt out.)
  • Expanded 401(k) eligibility. Part-time employees still need to log 500 hours to join their employer’s 401(k) plan, but can log them over just two consecutive years (instead of three consecutive years as defined in the 2019 SECURE Act).
  • More employees qualify for the Saver’s Credit, which offers extra tax deductions for low- to medium-income households when saving for retirement.
  • Bigger catch-up contributions for employees ages 62-64.
  • Employers can match contributions to 401(k) plans based on employees’ student loan payments (up to a certain percent of the employee’s salary), providing relief to those with student loan debt.

How does retirement and student loan debt relief from SECURE Act 2.0 work?

With SECURE Act 2.0, employers can amend their plans to recognize an employee’s student loan payments. Employees can earn employer matching contributions to their retirement by making eligible student loan payments. The qualifying student loan payment is treated as an elective deferral or an elective contribution. This allows them to start taking advantage of their employer 401(k) or 403(b) match earlier, with all the tax benefits and long term savings.

BenefitEd works flexibly with employers and retirement plan providers on SECURE Act 2.0, allowing employers to implement this unique retirement tool. BenefitEd will track or certify the employee’s qualified loan payments.

How does SECURE Act 2.0 allow employers to help employees handle a financial crisis?

According to 2022 Consumer Financial Protection Bureau Research, 24% of Americans have no money for emergency expenses, and 39% have less than one month of income saved.3 Most Americans are one unexpected financial crisis away from disaster.

SECURE Act 2.0 also includes provisions that can ease financial stress for employees who lack emergency funds. Section 127 of SECURE Act 2.0 outlines requirements for employers who set up optional linked emergency savings accounts for their employees starting in plan year 2024. Learn more about how employers can use this provision to help employees build emergency savings.

You can make a difference with your benefits.

You can provide your employees with benefits that help them save for retirement–and that recognize the challenges they face with repaying student loan debt, affording education expenses, saving for future education needs and managing unexpected financial crises. When you do this, you can increase employee productivity, satisfaction, and retention—and better compete for employees in a competitive market.

Learn more about BenefitEd’s education benefit programs or contact BenefitEd today.




Editor’s Note: This post was originally published in January, 2023 and has been updated for freshness, accuracy, and comprehensiveness.