Steve Fussell
Executive Vice President of Human Resources
  • Total Plan Assets
    $10 billion
  • Participants
  • Participation Rate
  • Average Deferral Rate
  • Default Investment
    State Street Target Retirement Funds
  • Employer Contribution
    250% on 2%

Taking a closer look
at employees’ needs led global health care company Abbott to launch a pioneering program that helps them repay their student debt.

The Freedom 2 Save program–for which Abbott sought and received an Internal Revenue Service private letter ruling–is designed so that if employees can prove that they are contributing 2% of their eligible pay to paying down their student loans, the employer will contribute 5% of an employee’s pay to his or her 401(k) account.

The program grew out of a broader project Abbott embarked on to evaluate its benefits offerings in the company’s 13 largest markets, says Mary Moreland, divisional vice president of compensation and benefits at the Abbott Park, Illinois-based company. “We heard about the issue of student debt in a lot of different ways,” she says, including in employee focus groups and from the company’s recruiting staff.

Abbott liked the approach of making a 401(k) match contribution versus giving employees a cash payment to help with student-debt repayment for three main reasons, says Steve Fussell, executive vice president of human resources. First, the company thought about the time value of money. “The investment we make in an employee’s 401(k) is going to be worth more over time, as the investment grows, tax-deferred,” he says. “The best time to save is when time is on your side: With every decade you wait to start saving for retirement, the amount you need to save roughly doubles.”

Second, Abbott considered the tax implications. “If we gave someone a big lump sum to pay off their loans, they’d have to pay a hefty tax on that amount today,” Fussell says. “Instead, employees can focus on paying down their student debt, while Abbott puts money away for their retirement.”

And third, Fussell says, the program’s design likely will motivate employees to stay at Abbott. “It’s an incredible retention tool,” he says. “There is no waiting period to become eligible for the program, and you need to work here only two years to be vested in the company contribution. We believe the benefit is significant enough to attract and retain the best talent, who likely are carrying loans for their education.”

It took just short of a year between when Abbott made its IRS submission and when it got the private letter ruling. “Behind the scenes, as soon as we submitted that, we started to think about how to administer the program, and how to communicate this program,” Moreland says. Abbott’s third-party tuition assistance provider, EdAssist, facilitates employee Freedom 2 Save enrollment, administers the program, and tracks employees’ proof of student-debt payments.

Freedom 2 Save started to enroll employees in August 2018, and all Abbott employees eligible for the 401(k) also can participate in the program. Currently about 500 employees participate in Freedom 2 Save, and the company anticipates that will grow over time to 2,500 to3,000, as more new hires join the company.

“The program pays for itself: Our employees are happier, more engaged and more productive, and they stay longer,” he says of the return on investment (ROI) for Freedom 2 Save. “That’s good business.”

Judy Ward

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