According to Craig Copeland, director of wealth benefits research at the Employee Benefit Research Institute, the provision will mostly benefit those with student loans who were not previously participating in their retirement plans, as "that's really who it's designed for."
For plan sponsors that begin matching contributions based on student loan payments, Mr. Copeland said "it's not a costly benefit they're adding," as they're simply giving the match to those who were not participating in the plan before, or not contributing as much.
"It's kind of a win-win situation for both employers and employees," he said.
Abbott Laboratories was the first company to offer such a program in 2018, after receiving a private-letter ruling from the IRS allowing it to do so. Under Abbott's Freedom 2 Save program, employees who put 2% of their annual salary toward student loan payments will receive a 401(k) contribution worth 5% of their salary — the equivalent of the company match.
"The whole idea behind the program was … we got your back, (and) you don't need to choose between paying your loan or saving for retirement," said Diego Martinez, divisional vice president for benefits and wellness at Abbott Laboratories.
Mr. Martinez said that for people first entering the workforce, saving for retirement may not be top of mind, but it's important to start saving early. In addition to saving earlier, the Freedom 2 Save program allows employees to redirect money they would traditionally put toward their 401(k) into their student loans, he said, which helps employees pay off their loans more quickly.
According to EBRI's Financial Wellbeing Employer Survey, conducted in June and July, 44% of employers surveyed said they were already offering 401(k) contributions tied to employee's student loan payments. Mr. Copeland said it's unclear exactly how these companies were offering such contributions, but the new provision "actually puts it into law" that they're allowed to do so.