After a 42-month hiatus, federal student loan payments resumed in October 2023. Impacted employees are now dealing with a new bill factored into their monthly budgets, leaving many stressed and worried.
As employers strive to support their workforce, offering benefits that help employees manage their student loan debt has become increasingly important.
More than just a paycheck
Whether you’re running an organization or working for one, most people would agree that employee financial wellness is a hot topic. A comprehensive benefits package — one that focuses on financial wellness — can help cultivate a happier, more focused and more engaged workforce that’s better prepared for retirement.
The pause on payments afforded borrowers over $260 billion in waived costs. However, the resurgence has added stress to employees’ financial situations, affecting their job performance, overall well-being and ability to make major life decisions. Younger workers, in particular, find themselves torn between repaying student loans and saving for retirement.
According to a recent study by the ADP Research Institute, about half of workers are in the process of leaving their workplace. Among workers with student loan debt, that number increases to nearly 60%.Turnover is costly, and offering the right benefits can encourage workers to stay.
Benefits for employees — and employers
By offering a retirement plan with a student loan matching program, employers can demonstrate their commitment to supporting employees in making sound financial decisions, ultimately enhancing employee retention and satisfaction.
Under the SECURE 2.0 Act, employers are enabled to match student loan payments as contributions to retirement plans, so employees can tackle debt while saving for the future. For every qualified student loan payment made by an employee, the employer may make a matching contribution to their 401(k) plan based on the amount of the loan payment.
The results?
- Reduced student loan debt
- A retirement savings increase (even if they’re not making contributions)
- Compound interest as 401(k) account grows
Plus, employers get a tax benefit for their matching contributions. If certain requirements are met, employers can deduct contributions made to a qualified retirement plan on behalf of its employees. The deduction reduces an employer’s taxable income — while helping more people achieve a secure financial future.
If you have a question about retirement benefits or their tax implications, reach out to the tax experts at Magone & Company.
This document is for informational purposes only and should not be considered tax or financial advice. Be sure to consult with a knowledgeable financial or legal advisor for guidance that is specific to your unique circumstances.