Posted August 21, 2018
By now, businesses are well aware of the financial stress employees experience. While many employers would like to offer benefits or perks to help employees pay off student loans or save for the future, most have limited budget options. Now employers can offer a new benefit product that takes advantage of unused 401(k) matching dollars to help pay down employee student loan debt.
Employees miss out on employer contributions
Many employers today offer matching contributions to retirement funds. However, two-thirds of Americans aren’t saving money in a 401(k). Many people site more pressing financial concerns such as student loans and credit card debt as the primary reasons they aren’t putting money away for retirement. Studies show that employees leave $24 billion in 401(k) matches on the table each year.
Employee Choice, exclusively from BenefitEd, has created a way for employees to make full use of their employers’ matching programs by applying unused dollars to help pay down student loan debt. Employees get welcome help paying off student loans. Employers can offer this benefit without making substantial increases to their benefits budget.
Choice removes benefit barriers
Employee surveys continually emphasize that employees like benefit choices. They want the opportunity to pick plans that best meet their needs at any particular time.
Through the BenefitEd Employee Choice program, employees can redirect or split their employer-matched retirement funds to make payments toward their student loan debt. This plan allows employers to stretch their benefits budget because they don’t have to adjust the budget they’ve already set aside for a match contribution. They’re also showing they care about employees by offering a benefit that allows employees to address financial needs in different areas.
- Employees can get help in repaying student loans. The Federal Reserve reports that over 44 million people collectively have $1.5 trillion in student loans. About 65 percent of the debt is owed by people under age 40. A study by American Student Assistance found that 92 percent of employees with student loans would take advantage of an employer contribution program similar to a 401(k) match.
- Other prefer different investment options. Some people find college savings programs, such as 529 plans, or retirement savings options more valuable. As college education costs continue to rise, parents and grandparents are stepping in to help out. Using 529 college savings plans is one way they can set aside money to help cover their kids’ tuition.
Employee satisfaction, commitment improves
Companies in many industries are struggling to fill positions. Research shows that one-fourth of the workforce is looking for a different job. Last year, 27 percent of private-sector employees switched employers. That explains why employers say employee turnover is their #1 challenge.
Employers spend over $4,000 on average to hire a new employee. Since benefits can influence employees to stay with a business, it’s easy to see the value in offering the benefits they want.
Businesses reputation enhanced
Perceptive employers know that their employees have many financial worries and concerns. They’re smart to invest in employees by offering benefit choices to help them resolve these concerns and provide a path to greater financial freedom. Employees will be more focused and content. Their performance will improve. Often, they become leaders in the organization and help make the business an employer of choice. And having a positive reputation will go a long way toward attracting and keeping great employees.