Work Perks: The Life Planning Account

The socially forward thinking workplaces of America are coming up with new benefits for their employees. Student loan reimbursements, housing assistance, and longer parental leaves are just a handful of these trendy, attractive, perks. Craig Dolezal, senior vice president at the human resources consultancy Aon Hewitt, has stated that there is an increased interest in life planning accounts.

Employers would fund these taxable accounts with money that workers could use to spend on certain expenses. Approved expenses could be student loan payments, home closing costs, a child’s college fund, or even a gym membership.

An account like this puts employers in a position of power by seemingly offering a wide array of benefits that this account can be used for. This protects the company from actually having to pony up for a premium package of benefits. Taking this approach can deter millennials, specifically, who are expecting more and more benefits from their employers to offset high salaries. This year, the Society for Human Resource Management surveyed its members on 350 benefits; 10 years ago, it asked about 219, and 20 years ago, just 60.

Meanwhile, companies like Fidelity and PricewaterhouseCoopers have added student loan relief as a perk in fear of potential generational backlash. Dolezal says that they think, “it feels like that’s an allocation of our company dollars to a very specific slice of our workforce.” While this statement is technically true, however, it is quite a big slice of the workforce pie.

There are over 40 million Americans that hold student loan debt. That is one in six adults in America that hold student loan debt. The average Class of 2016 graduate has $37.172 in student debt. That number is up 6% from last year. One company, Alltech Financial, is offering their services to businesses specifically to help their staff as a Student Loan Assistance Company. The company seems to be first of its kind and recognizes the growing desire for student debt relief. Such a service is becoming a must for companies today seeking and retaining qualified employees.

Two Bills That Can Change Student Loans Benefits

In 2016, during President Obama’s State of the Union Address he stated we needed to tackle student debt. That higher education should be and needs to be made more affordable for all Americans. Obama stated that most graduates are held back from their potential by starting their adult lives while “stuck in the red.” Obama and student loan borrowers should be happy to know that we are chipping away at the problem.

There is some bipartisan legislation currently pending in Congress. These bills are the Student Loan Repayment Assistance Act and the Employer Participation in Student Loan Assistance Act. If the legislation passes it would allow employers to assist employees with their student loan repayments through a benefit that would be tax-exempt. As of now, student loan reimbursements are taxed, and these bills would offer new incentives for companies to help their staff pay off student loans at a faster pace.

For example, a 401(k) contribution from an employer is tax deductible for the employer. That contribution is also tax-deferred for the employee. This means that the employee doesn’t pay taxes on that amount until they take it out for retirement. Currently, neither is the case for student loan benefits. It isn’t a tax deductible for the employer, nor is it tax deferred for the employee.

With a lot of companies currently making contributions out of pocket, student loan benefits don’t make much sense in the current climate. However, it is becoming an increasingly bigger bargaining chip for the well-educated, highly qualified, and young workforce. However, if this bill passes companies will be able to pay $5,250 per year to include contributions to their employee’s student loan payment.

This bill is in its infancy still and who knows how the election will impact the bill. Washington moves slow and some companies will need an answer now. Alltech Financial, an industry leader in student loan benefits, is working with companies to reduce their employee’s monthly payments. For a lot of student loan borrowers out there this might be the better plan. Alltech Financial works with your loans and programs in place to lower monthly payments and set their clients on track for student loan forgiveness.

The $5,250 cap set in place by these bills might not be enough – only $437.50 per month – some student loan borrowers can be as high as a couple thousand depending on loan amounts. Alltech Financial doesn’t set a ceiling for the benefits you can receive. They work with individuals as well as businesses and treat every situation with the individual care it needs because no two situations are alike.

Student Loan Benefits Are Trending

The student loan crisis is crippling today’s youth. The millennials are struggling. They are the most educated, worst paid generation. Adults who range from 18-34 between 2009 and 2013 averaged earnings of $33,880 a year. The lowest earnings since 1980. The result of this is the national student debt reaching nearly $1.4 trillion. With millennials driving today’s workforce, employers are making interesting changes.

2017 is primed to have student loan benefits skyrocket in popularity and availability. Currently, only 4% of employers offer student debt benefits. A recent Fidelity survey found 13% of the 129 companies that participated offered student loan repayment assistance in 2016. In addition, 21% said they were considering it for 2017. A growing debt and a massive 70% of college graduates leaving school with loans the trend will only continue to grow.

There is no plan in place to address the massive debt shared by 43 million Americans. Businesses have caught on that they need to attract top tier talent and retain their best workers. A total of one in every 8 Americans hold student loan debt. As time goes on that statistic will only get worse. That’s why 75% of young professionals in an American Student Assistance survey said help paying off their student loans would be a major factor in deciding to accept a job offer.

In another survey, done by EdAssist, young workers said they aren’t able to take advantage of retirement benefits because they are drowning in their monthly student loan bills.  49% of the workers in the survey said they would rather have help paying their student loans instead of other traditional benefits such as retirement plans.

Penguin Random House has recently announced they will contribute $1,200 a year to their employee’s student debt, which seems to be the way a lot of companies are approaching the new benefit. Definitely, a grand gesture to their employees. Yet, it may not be the best. Alltech Financial works with their clients to reduce their monthly payments through plans already set in place by the Department of Education. By doing so, clients are put at ease with a lower payment and they are on track for loan forgiveness as well.

Staples Offers Student Debt Assistance to Employees

Companies across America are adding a new benefit for their employees. Only a small percentage of companies are offering it but it has become one of the more sought after benefits for the young working population. Student loan debt is wildly out of control with no end in sight to right the ship. Companies have been noticing this and some employers, like Staples, have been trying to figure out ways attract young workers to become employees.

The large office supply chain is providing $100 a month for up to 3 years to their full-time sales associates as well as high potential and top performing employees who are paying of student loan debt or if they are in the process of earning a degree so they can save extra money to pay it off in the future.

Only 4% of employers are offering student loan repayment help for their employees. Despite research showing that student debt is causing millennials to delay marriage, having children, and buying a home. In fact, 40% of Americans with student debt are behind on their payments because they must pay rent first, their car payment second, and then it trickles to their food budget and general living necessities. This puts a strain on the economy as a result because the people in debt and mainly millennials who we need to drive the economy simply can’t afford to spend because their money is already spoken for as soon as they receive a paycheck.

“With unemployment low, many companies are struggling to pull in and retain dedicated young workers with good skills, and increasingly they are eyeing help with student loans as a means to stand out as an employer,” said Gary Kushner, President of Kushner & Co. a benefits consulting firm based in Michigan. “As companies face recruiting difficulty — especially among millennials — help with student loans may become an increasingly attractive benefit. But the future may depend on whether the U.S. government institutes some kind of relief — a topic in this year’s election politics,” he said. Millennials – the most educated generation of all time – is seeking relief, some companies are trying to adapt to the new market of workers with incredible skills and work ethic that need assistance with their student debt. They often look for the company that will offer the most money whether or not it is actually in their field. With these benefits, they don’t have to make that sacrifice, and companies are getting wind of this and including student loan relief plans in their benefits package.

Student Loan Debt Is Growing – Can You Help Your Employees?

Student loans are a massive burden on many Americans across the country. Throughout the United States there are 43 million Americans who are locked down by student debt. The total student loan deb in American is rapidly approaching $1.4 trillion which is averaging $30,000 in debt across those borrowers. Student debt can put a delay on buying a home, getting married, and growing your family. Many borrowers struggle daily just to pay their monthly student loan bill.

In 2016, only 4% of companies offered a benefit that is surely to sweep across benefits packages in 2017, student loan assistance. Of the companies that did offer assistance in 2016, many didn’t know how to approach and facilitate the benefit for their employees. Most companies like Penguin Random House and American Bankers Association are paying their employees a flat amount strictly for their student loans. American Bankers Association is offering up to $1,200 per year toward their employee’s student loan payments with a life time benefit cap at $10,000.

The trend was growing at the end of 2016 and is set to continue growth in 2017 and student loan assistance companies are popping up and providing solutions. Alltech Financial are providing employers with a complete end to end turnkey solution to help employees and their families reduce their monthly student loan obligations and prepare them for total loan forgiveness.

“We’re encouraging our members to consider offering a benefit like this to help attract and retain millennials in their individual markets,” ABA President and CEO Rob Nichols told the Journal. “Since so few employers currently offer such benefits, we see this as an opportunity for banks to uniquely position themselves to attract and retain young talent.” 75% of employees prefer an employer with a student loan repayment benefit, while only 4% of companies offer it. See what our student loan experts can do to help your employees succeed.