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WELLNESS STRATEGIES
administering one themselves, Holdvogt
says and notes that most employers opt
to. Along with the time and expertise
required to do the administrative work, he
says, these programs raise privacy issues.
" One reason it's quite common to work
with a vendor is that employers don't want
to have to be in the position of asking
their employees to give them sensitive
financial information, " he explains.
Integrated or
Stand-Alone: Which
Approach Is Best?
Up until now, if an employer was weighing
the addition of a student loan program, it
was to be integrated with the company's
401(k) plan. For a model, employers can
look to a 2018 IRS private-letter ruling
for a program created by Abbott Labs-a
2019 Plan Sponsor of the Year finalist-in
which Abbott employees who contribute at
least 2% of their salary to paying off their
student loans get a tax-exempt 5% employer
contribution to their 401(k) account.
An integrated program " gives
employees the opportunity to save for
retirement in those critical early years-
when they can take full advantage of time
and the compounding of interest-as
opposed to waiting until they pay off their
student loans to start saving, " says Lydia
Jilek, senior director at Willis Towers
Watson in Dallas. " If people focus on
paying off their student loans in their
20s and 30s, they may not start to make
significant contributions to their 401(k)
until later, and that's not good. "
Beyond fostering retirement readiness,
integrating such a program with
the retirement plan can have advantages
for employers, too. " If participation is
already high in your 401(k) plan, it's
almost like it isn't a new budgeted item, "
says Neil Lloyd, a partner in consulting
firm Mercer in Vancouver, Canada. This
is because the student debt program's
employer contribution effectively replaces
the 401(k) match for employees in the
program. " And if it's well-integrated with
your recordkeeper's system, it's quite
administratively simple, " he says.
However, an integrated program
also has drawbacks for employers, Jilek
says. " When people start to dig into the
nuances-especially that you need to have
a non-safe-harbor plan to do an integrated
program-they don't want to end theirs, "
she says. Plus there is currently no Treasury
Department guidance on how to run an
integrated program, so employers have
only the IRS private-letter ruling issued
specifically to Abbott Labs as a road map.
A stand-alone program offers an
employer much more flexibility than one
integrated with a qualified retirement
plan subject to the Employee Retirement
Income Security Act (ERISA). " The big
thing is that you can structure it in a
way that applies only to certain classes of
employees, as long as those classifications
do not discriminate in favor of highly
compensated employees, " Antognoli says.
" You don't have to offer it to everyone:
You can tailor it by geographic areas or job
classifications. "
Employers also have flexibility as
to when they contribute and can make
monthly contributions or a year-end contribution
or take a hybrid approach. " Instead
of paying $150 a month, an employer could
pay $75 a month and then $900 at the
end of the year, " Lloyd says. " There have
been some quite clever designs, to use as
a retention tool for employers. "
On the challenging side for standalones,
Lloyd says, employers' contributions
typically are subject to both payroll
tax and personal income tax-notwithstanding
the temporary CARES Act provision.
And because these contributions are
not in lieu of a 401(k) match, " if you're
trying to justify that expense to your organization,
it's quite a substantial dollar
amount, " he says. Some employers also feel
that offering a benefit only to employees
with student debt essentially discriminates
against other employees. -Judy Ward
6 Possible Levels to
Stand-Alone Programs
EMPLOYERS that implement a stand-alone program often do it incrementally, says
Lydia Jilek of Willis Towers Watson. Her company considers a student loan program to
have six levels or components.
On the first level, an employer can utilize a provider " dashboard " that allows an
employee to integrate information on all of his student loans in one place and figure out
repayment priorities. The second level is debt counseling from a specialist provider-
something Jilek says is important for helping people decide on a good repayment plan.
On the third and fourth levels, an employer can offer access to provider services for
refinancing and/or consolidating student debt.
On the fifth level, Jilek puts employer contributions. " Lots of clients go for the first
four levels in their first year of doing a program, " she says. " Depending on the number of
people who participate in the first year, you can get a better sense of the number in your
organization who likely would take advantage of an employer contribution. "
On the sixth level, Jilek puts complimentary services offered by specialist vendors.
These services focus on proactively counseling employees or their children who are evaluating
their college education options, weighing the costs and benefits of different colleges
and degrees. " Vendors are moving into the 'college coaching business,' " she says, " to help
make sure the next generation doesn't graduate with so much student debt. " -JW
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