Here at LEAF, we often recognize the increasingly familiar decision between paying off student loans and saving for retirement. In a country burdened by $1.48 trillion in student loan debt, how can employees set aside retirement funds if they still owe loan providers a sizeable portion of their income?
The average amount of student loan debt for college graduates in 2017 was $39,400, up 6% from the previous year. More than 60% of college grads now leave school with at least some debt. As these graduates enter the workforce, it is unlikely that they will be able to pay off their loans and save for the future effectively.
This past August, an IRS private letter ruling laid out a path to allow companies to expand their financial benefits packages. In the letter, the IRS affirmed an approach that would allow employees of Abbott Laboratories who direct a certain amount of their paycheck toward student loan repayments to still get an employer contribution in their 401(k) retirement accounts even if the workers don’t contribute themselves. This would mean that workers could finally pay off debt and save for the future simultaneously.
While a private ruling is not the same as a definitive IRS guidance, it still offers a unique opportunity for other employers seeking to take advantage of this promising new development.
A recent article from Employee Benefit News (EBN) outlines how companies can use this new information. Read more here.
Ready to move past the research and skip right to a retention strategy? Sign up with LEAF, so your employees can pay off student debt, save for retirement, and save for future education costs simultaneously - with easy payroll contributions your company can match. If you want any more information, please feel free to reach out! We are always ready to talk through an implementation strategy that works for your company's specific needs.