What to Know About the Secure Act 2.0 and Student Loan Debt

With the Secure Act 2.0 signed into law, Americans will benefit from changes to retirement provisions designed to help increase savings and access to retirement benefits. These changes include automatic enrollments into employer-sponsored retirement plans, boosting catch-up contributions, tax incentives for employers, and more.

One groundbreaking change: Retirement matching for student loan payments

The Secure Act 2.0 also allows employers to make matching contributions to retirement accounts based on an employee’s student loan payments. In other words, when an employee makes a payment on their student debt, employers can count that towards a retirement contribution that can be matched in the employee’s employer-sponsored retirement account.

This is huge news, because we know that one of the big roadblocks Americans face when saving for retirement are their student loans. In fact, 79% report student debt cuts into their ability to save for retirement. And, it benefits employers because it creates more opportunities for them to match payments, increasing their tax benefits.

An opportunity for retirement benefit providers, too

If you’re a retirement benefit provider offering 401(k)/403(b) benefits, or workplace benefit platform, this is an incredible opportunity to 1) capture increased enrollments and 2) offer competitive benefits to employers. 

Here’s how the Secure Act 2.0 sets up these opportunities:

More Americans will be enrolled in retirement plans

The Secure Act 2.0 will contribute to more Americans being enrolled in retirement plans in a few ways.

The first way is mandatory enrollments. Starting Dec. 31, 2024, employers with more than 10 employees who offer retirement plans must provide automatic enrollment for their employees. While employees are free to opt-out, this will generally increase Americans who are enrolled. The Secure Act also makes automatic escalations of the amount an employee contributes over time to their accounts(again, the employee can opt-out if they wish). This means more Americans will be enrolled and the amount they will contribute overall will likely increase.

The second way the Secure Act 2.0 contributes regards part-time employees. Under Secure Act 2.0, part-time employees can access employers’ retirement benefits after a certain period of time worked. Again, this increases enrollments and contributions.

The bottom line is that this is an opportunity to capture this growth in employees accessing retirement benefits leading up to the execution of the Secure Act and after. 

Employers will be looking for ways to adopted retirement benefits, or be competitive with them. Why? Because they’ll also be incentivized thanks to the Secure Act 2.0.

Employers are incentivized to contribute and offer plans

The Secure Act 2.0 has benefits in play for employers. Firstly, employers will be allowed to provide financial incentives to encourage participating in retirement plans, though it seems like Congress is still ironing out the details of what these incentives can look like.

Small businesses will be encouraged to begin offering retirement plans with ready-made “starter plans”, which cuts down on admin expenses. And, the Secure 2.0 provides tax credits for implementing retirement systems for small businesses.

Of course, there are also tax incentives to matching employees retirement contributions. And, thanks to the passage of the CARES Act, employers can also contribute directly to an employee’s student loan accounts as a benefit and receive tax incentives, too.

Bottom line: Employers will be looking to onboard retirement options, or increase competitive offerings, and overall enrollments and contributions will increase. This is a great time to adopt student debt options if you’re a retirement benefit provider.

In order to provide student loan retirement matching, you’ll need the right data.

Payitoff is the industry-leading provider when it comes to high-quality, reliable connections to student loan data. We’re fully SOC 2 compliant and auditable, and our data connections are fully scalable to support growing enrollments and future endeavors.

We make it easy to offer student loan retirement matching for employers, because setup only takes an afternoon to complete.

Workplace benefit leaders already use Payitoff to facilitate these matching programs. Contact us today about how to make retirement matching for student loan contributions a reality for your employers today!

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