Updated with correction.
Willis Towers Watson on Sept. 12 announced a program that would give participants in defined contribution plans a choice of allocating the plans’ employer contributions to non-taxable student loan student loan repayments, health savings accounts or health reimbursement arrangements.
“This is a meaningful step forward” in giving sponsors flexibility and participants choices to use retirement savings dollars, Chris West, defined contribution strategy leader at Willis Towers Watson, said in an interview.
“We have been talking to clients for some time,” she said. “Many of our clients are interested in choices, and I anticipate there will be much more activity now that this is public.”
The program provides a framework for action, allowing how the employer contributions can be allocated subject to various DC plan guidelines such as non-discrimination testing.
The program is based in part on a recent private letter ruling from the Internal Revenue Service allowing an unnamed company to allow participants to use its employer contribution to its DC plan for to non-taxable student loan student loan repayments, health savings accounts and health reimbursement arrangements.
Willis Towers Watson served as the “strategic advisor” to this company “and assisted with developing the plan design,” said a Willis Towers Watson news released on Sept. 12.
West declined to name the company.
IRS private letter rulings cover only the letter’s applicant. “This ruling is directed only to the party requesting it,” said the IRS letter dated May 20 and made public Aug. 23. “It may not be used or cited as precedent.”
The IRS letter was requested by a company that makes a DC plan contribution regardless of how much participants pay into their retirement accounts.
West said the Willis Towers Watson program leaves it up to clients as to what type of employer payment they will use, creating their own guidelines for participants.
The issuance of the private-letter ruling and the launch of her company’s program should address sponsors’ concerns about the “legal, compliance, tax and administrative challenges associated” while giving participants a choice, she said.
Willis Towers Watson representatives will advise clients “on feasibility, cost implications, alignment of vendors and regulatory and compliance requirements,” the news release said. “They also focus on an effective delivery to employees, including communications and employee choice election administration to ensure a seamless experience.”
