Many businesses -- and almost all employees -- would like it if there was a way for companies to help members of their workforce save for financial goals or pay off student loans. While most employers would like to offer such benefits, many have limited budget flexibility. But now, new options are helping them offer more meaningful perks without making substantial increases to their benefits budget.
One such benefit utilizes an employers' 401(k) match budget to allow employees to choose which financial need they want to support: student loans, retirement, or both. Such perks are enticing employees to stay in their current jobs, or accept positions with new companies that provide these enhanced benefits.
Interestingly, while many employers today already offer matching contributions to retirement funds, this money often goes unused. Actually, Bloomberg reports two-thirds of Americans aren't saving money in a 401(k) at all. Why? Many people cite more pressing financial concerns, such as student loans and credit card debt, as the primary reasons they aren't putting money away for retirement, and studies show that employees leave $24 billion in 401(k) matches on the table each year.
Unfortunately, debt doesn't just prevent people from saving for a comfortable retirement -- individuals are also putting off big life experiences, such as starting a family or purchasing a car or house, due to their student loan debt. And at a time when over 44 million Americans collectively have $1.5 trillion in student loans (according to The Federal Reserve), many job seekers are on the lookout for benefits designed to help pay off student debt.
Enter programs such as Employee Choice, offered exclusively from BenefitEd, which allows employees to redirect or split their employer-matched retirement funds to make payments toward their student loan debt. Employees get welcome help paying off student loans while making full use of their employer's matching program, and companies can offer this benefit without making substantial increases to their benefits budget. This voluntary, Non-ERISA benefit (403(b) plans that involve voluntary plan participation only, i.e., an employer is not contributing) is separate from a retirement program, meaning employers don't have to change their retirement plans or get approval from other entities.
Programs like this are also helping businesses financially. Research shows that one-fourth of today's workforce is looking for a different job, and in 2018, 27% of private-sector employees switched companies. Because employers spend over $4,000 on average to hire a new employee, it's no surprise that employers say turnover is their number one challenge. In short, great benefits can lower costly turnover, and ultimately be a differentiator for employers looking to recruit top talent.
To learn more about how employers can support future and current employee financial needs, visit youbenefited.com/products/employee-choice.
When benefit choices provide a path to greater financial freedom, employees will be more likely to join the team, stay focused on their jobs, and stick around long-term.