Flexibility is the future of employee financial wellness benefits

SECURE 2.0 introduced innovative provisions that allow plan sponsors to tailor benefits to meet diverse employee needs. During the Employee Benefit Research Institute Financial Well-being Symposium, a panel discussed ways that the legislation gives employers the ability to provide benefits that help address the issue of employee student debt, as well as meet other financial needs.

The student debt burden impacts workers of all ages – not only younger workers – said Priya Punatar, director of workplace research for Fidelity Investments. Twenty-five percent of the workforce holds student debt and 80% of the workforce has someone in their immediate family with student debt. And student debt has a bigger impact on older workers. Fourteen percent of student debt is held by people aged 50-61 but that age group holds an average debt balance of more than $46,000 – higher than workers of any other age bracket.

Student debt holders have less saved for retirement, she said. Among workers age 50 and older, those without student debt have accumulated an average retirement balance of more than $221,000 as opposed to an average retirement balance of $153,000 held by those in that age group who have student debt.

Households with student debt face additional financial obstacles. Punatar said 90% of those with student debt said that paying off that debt impacts their ability to buy a home, build emergency savings or manage day-to-day expenses.

SECURE 2.0 enabled employers to address their workers’ student debt as well as their workers’ ability to save for retirement.

The law treats student loan payments as qualified contributions. Employers can match employees’ qualified student loan payments just like they would match 401(k), 403(b), 457(b), or SIMPLE IRA contributions — even if the employee isn’t making elective deferrals into their retirement plan.

Fidelity offers a SECURE 2.0 match benefit Punatar said has resulted in 11% higher retirement plan participation and an annual average of $1,800 in retirement savings.

Why employee choice has become a priority

Two-thirds of organizations are looking to enhance their benefit choice over the next three years while employees who have more choices say they are twice as likely to say their benefits meet their needs.

Holly Tardif, director of retirement at WTW, discussed flexible choice designs that empower employees to tailor their benefits to their financial needs and life stages.

An employer flex contribution can give workers options to direct funds toward saving for retirement, reducing health care or child care costs, or paying down student debt. Tardif said flexible choice designs address employees’ short-term strain, enhance the employee experience and support health care cost pressures.

Tardif said an IRS private letter ruling permits an employee to allocate employer dollars among the following benefits:

• An employer’s credit to a worker’s health reimbursement arrangement.
• An employer nonmatching contribution to a defined-contribution retirement plan.
• Student loan repayment.
• Health savings account contribution.

“This has reinvigorated the conversation around benefits,” she said.

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