Case Study: RETIREMENT PLAN SERVICES
INTRODUCTION
Did you know only 27% of organizations provide formal financial education or guidance to participants on student loans and debt? While most financial advisors offer limited services to their employer plans, such as investment menu design and fund selection, there is an increasing need for robust plan and participant-specific education programs designed to address employees’ individual financial challenges and concerns.
CHALLENGE
Recently, the Sikich team met with a client struggling with student loans and debt despite an adequate salary. She made the difficult decision to stop contributing to her 401(k) in order to make her student loan payments. Because of this decision to stop contributions, she became ineligible for her company’s matching contribution. Therefore, she is now missing out on her employer’s match and the power of compounding her savings for an even longer time period.
SOLUTION
Through plan analysis and regular meetings with the employee population and the retirement plan committee, our team understands this client’s scenario is not uncommon. Her employer regularly hires candidates with college degrees (and, ultimately, student loan debt). What we helped the employer to see was the opportunity to qualify for one of the many provisions in the SECURE Act 2.0. Beginning in plan year 2024, employers may match student loan repayments into employees’ 401(k) plans by amending the plan document. Under this practice, employees can contribute to their student loan debt through a 401(k) plan and be eligible for employer-match payments toward their loan debt. There is no cost difference to the employer if they wish to utilize this assistance program similarly to a 401(k) plan match.
The team of specialized retirement plan advisors at Sikich designs robust plan-specific education programs to address the all-too-common challenges of large student debt obligations that force employees to make a choice between saving for retirement or paying their loans. Our team devised a solution to this issue through plan analysis and active listening during group education and one-on-one meetings. This level of service helps employers effectively communicate their support for the well-being of their employees, thereby helping the business retain its talent in a competitive labor market.
For a second opinion on your company’s financial education program or the potential impact of the SECURE Act 2.0 on plan design, please contact the Retirement Plan Services team at Sikich.
Investment Advisory Services • Fiduciary Support Services • Provider Benchmarking • Plan Analysis • Thought Leadership • Employee Education Design
Advisory services offered through Sikich Financial, an SEC registered investment advisor.
About our authors
Joe Connell
Joe Connell has dedicated the past 15 years to helping organizations improve and enhance their retirement programs. His long-term track record of success is a result of working with hundreds of employers in implementing prudent processes designed to reduce fiduciary liability and plan expenses, meet specific plan objectives and significantly improve participant outcomes.
Gretchen Radach
Gretchen Radach, MBA, is a senior relationship manager, who specializes in analyzing retirement plan metrics. Collaborating with plan sponsor clients, she creates targeted communication strategies to improve the health of the plan as well as help participants improve their retirement outcomes.
