Julia Pollak, Chief Economist at ZipRecruiter.
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A new employee perk has burst onto the scene this year, and companies are racing to adopt it. It’s the 401(k) match for student loan payments. This is the result of a provision in the Securing a Strong Retirement (Secure 2.0) Act, legislation that went into effect at the start of the year aimed at improving Americans’ retirement readiness.
Many Americans say they aren’t currently saving for retirement because they’re paying off student loans. A ZipRecruiter survey last year found that 21% of student loan holders had no idea how they were going to afford the resumption of student loan repayments in October 2023—the end of the pandemic-related payment pause. In another survey, 22% of student loan borrowers said they would need to reduce their retirement savings to make room for student loan payments.
The Secure 2.0 Act eliminates this tradeoff and allows employers to count student loan payments toward retirement account contributions and match them. For example, if you earn $60,000 per year and pay 5% of your salary toward your student loans, your employer can now contribute $3,000 into your retirement account each year, helping you pay off your student loan debt and save for retirement at the same time.
Abbott Laboratories spearheaded the innovation, petitioning the Internal Revenue Service (IRS) to let it offer the benefit and securing approval in 2018. Within a year, nearly 1,000 employees had signed up. The Secure 2.0 Act has now given the green light to all employers to do the same.
Companies that have raced to offer the perk in the weeks since include Kimley-Horn, a premier engineering and design consultancy; Chipotle, the chain of fast-casual restaurants; Kraft Heinz, a large food and beverage company; Unilever, a large consumer products company; Masco Corp., a construction goods manufacturer; and News Corp., the publishing company that owns Dow Jones & Company, among other publications.
Typically, employee benefits evolve gradually. But in just the first few weeks of the year, ZipRecruiter has already seen the perk mentioned in new job postings. Employers clearly sense an opportunity to become more competitive in the war for top talent by adding an employee retention tool that workers will value highly.
One reason companies have been quick to adopt the benefit is that financial wellness benefit providers have made it easy to administer. For example, SoFi at Work has introduced a Student Loan Verification service that simplifies the process of connecting employee student loan repayments to employer-matched retirement contributions. Betterment at Work has similarly rolled out a product that lets small businesses automatically match workers’ student loan payments with 401(k) contributions.
The benefit follows a trend we noted in our recent Labor Market Outlook report. Namely, employers are increasingly using their benefits programs to address significant social problems that affect their employees’ lives. The 401(k) match for student loans shows just how far companies can take the trend. A single employer, responding to employee concerns and seeking a standout retention tool, can spark an IRS rule change, legislative action and the widespread adoption of a new employee perk.
The burden of student loan debt will no doubt be an important presidential election campaign issue over the coming months. No matter the outcome, however, the problem may become less worrisome to many U.S. workers, thanks to this welcome new corporate innovation.
The lesson for workers is that there can be an upside to telling their companies’ total rewards program managers what their dream perks might look like. The lesson for employers is that they can gain an advantage in the competition for talent if they listen to their employees’ challenges, advocate for solutions to policymakers, stay abreast of innovative product offerings from benefits vendors and act quickly.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
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