Employers are increasingly matching 401(k) contributions for employees who pay off student loans.

• An increasing number of companies are providing a 401(k) plan match to employees who are paying off their student loans.
• Starting in 2024, employers can offer a match for student loan payments under a recent law, Secure 2.0, which treats these payments as a 401(k) contribution.
• Early adopters of large companies include Kraft, Workday, News Corp., and Comcast.
• Though most employers are not yet offering or planning to offer the benefit.

Employers are increasingly matching their workers' student loan payments by contributing to their 401(k) plan.

Typically, companies have only contributed to workers' 401(k) plans based on their voluntary contributions. For instance, a worker saving 3% of their annual salary in a 401(k) might receive a 3% match from their employer.

Now, companies can treat a worker's student loan payments as an optional 401(k) plan contribution.

Employers can offer matching funds for workers' student debt payments under federal law. Unlike contributions to a 401(k) plan, workers do not need to participate in the plan to receive these funds.

The Secure 2.0 retirement changes package's measure became effective from 2024.

Kraft, Workday among companies adding the benefit

The objective of the policy is to assist workers in managing two conflicting financial responsibilities: repaying debt and saving for retirement.

Nearly 1.5 million eligible employees have benefited from the implementation of the benefit by more than 100 companies, as per data from Fidelity, the largest 401(k) plan administrator in the US.

Some of the largest firms in the U.S., including Kraft, Workday, and News Corp., have student debt portfolios, according to Jesse Moore, senior vice president and head of student debt at Fidelity, who explained this in an email.

"Numerous individuals are expressing a keen desire to provide it in 2025," Moore stated.

Alight, a leading U.S. retirement-plan administrator, predicts that about 5% of employers have already implemented the benefit, based on forthcoming survey results.

In September, Alight surveyed 122 employers with a total of 11 million workers and found that 12% are "very likely" to adopt it in 2025, while 29% are "moderately likely" to do so.

Financial help and worker retention

Secure 2.0 has led to a significant increase in interest, according to Rob Austin, head of thought leadership at Alight, in an email.

Next year, Comcast is introducing a new benefit that matches student loan contributions with 401(k) contributions.

A Comcast spokesperson stated that offering the benefit will aid workers in managing their long-term financial wellness in a tax-efficient manner.

Up to 6% of their eligible annual earnings can be matched by approximately 90,000 U.S. employees, according to the statement.

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Experts said that some companies view the match program as a means to attract and retain college graduates in competitive fields.

Comcast spokesperson stated that many employees, particularly those in the early stages of their careers, face challenges with student loans.

They stated that they are attempting to create a value proposition that addresses the requirements of workers.

The Internal Revenue Service states that the student loan measure is also accessible to companies that sponsor other types of workplace retirement plans, such as 403(b) or governmental 457(b) plans or SIMPLE IRAs.

How the student loan benefit works

According to Brian Dobbis, retirement solutions lead at Lord Abbett, a money manager, the maximum amount of qualified student loan payments that can be made is generally limited to the annual salary deferral limit, which is $23,000 in 2024 for workers under age 50.

In 2024, a 30-year-old worker contributes $18,000 to their 401(k) plan and also pays $8,000 toward their student loans. However, only $5,000 of those student loan repayments is eligible to be matched, according to Dobbis.

The amount of matching funds that an employer provides to a worker's retirement account is determined by the employer's match cap, which is typically between 3% and 6% of the worker's annual salary.

Of course, companies may structure the benefit somewhat differently from one another.

Companies had the benefit prior to Secure 2.0

Before Secure 2.0, employers were already providing a 401(k)-linked student loan benefit to their employees.

Since 2018, Abbott, a healthcare technology company, has offered a similar benefit through its "Freedom 2 Save" program, which was believed to be the first of its kind. The company obtained a private letter ruling from the IRS to enable this.

More companies have followed since.

In 2022, approximately 1% of 401(k) plans offered or planned to offer a match based on student loan payments, according to an annual survey by the Plan Sponsor Council of America. By 2023, the percentage of plans offering this match had increased to about 2%, as indicated by the group's latest poll of 709 employers, set to be published this month.

"Abbott is credited with pioneering the idea of pharmaceutical companies adopting technology, which has since been adopted by competitors," said Austin of Alight.

PSCA discovered that the share of the largest firms, with over 5,000 employees, increased from 2% in 2022 to almost 5% in 2023.

According to Hattie Greenan, PSCA's research director, there has been a rise in interest among firms with a large number of college-educated employees.

As companies strive to attract top talent, they will gradually increase this number by differentiating their benefits packages and resolving administrative complexities, according to Greenan.

Why many firms aren't adding a student loan match

However, most companies are still sitting on the sidelines.

According to Alight's survey, 55% of employers say they are "not at all likely" to add the provision in 2025.

Ellen Lander, founder of Renaissance Benefit Advisors Group in Pearl River, New York, stated that there are several reasons businesses may not want to implement a measure, and these reasons can differ among companies.

None of her clients have yet chosen to adopt it.

Employers may already provide a different education benefit to their employees. Additionally, companies with many high earners may not feel the need for the benefit if there is no evidence of low 401(k) participation among those with student debt, she stated.

Some employers may make a non-elective contribution to workers annually, even if they do not participate in the company 401(k), according to Lander.

Lander stated that one client considered the student loan policy to be "unfair" because it only applied to a specific group of workers, namely those with student debt.

"Lander stated, "I hope every client discusses it with their consultant. It's something you should definitely consider. Then, you need to get into the weeds: Do you need it?""

Disclosure: Comcast owns CNBC parent NBCUniversal.