The Travelers Companies has created The Travelers Paying It Forward Savings Program for its employees, which will allow payments that U.S. employees make toward their student loans to be eligible for the company’s 401(k) matching program.
Alan Schnitzer, chairman and CEO of Travelers, says many of the firm’s younger employees struggle to save for retirement because student loans weigh so heavily on their finances.
“Investing in their education shouldn’t stop our employees from investing in their future,” Schnitzer says. “We are promoting a standard of employee care that enables them to do both.”
Pointing to data from the Federal Reserve, Travelers notes that student loan debt in the U.S. topped $1.5 trillion at the end of 2018 and that 41% of those between the ages of 18 and 29 have no retirement savings. In addition, 42% of those who attend college have incurred at least some debt for their education.
The Travelers Paying It Forward Savings Program will go into effect in January 2020.
In a recent private letter ruling, the Internal Revenue Service (IRS) says that under a 401(k) plan, if an eligible employee makes an elective contribution during a payroll period equal to at least 2% of his or her eligible compensation during the pay period, the plan sponsor makes a matching contribution on behalf of the employee equal to 5% of the employee’s eligible compensation during the pay period. The regular matching contributions are made each payroll period.
In addition, Senators Ron Wyden, D-Oregon, and Ben Cardin, D-Maryland, have introduced legislation that would allow 401(k), 403(b) and SIMPLE retirement plan sponsors to use their plans to provide student loan repayment benefits to employees.
According to a summary of the bill, The Retirement Parity for Student Loans Act would permit these plan sponsors to make matching contributions to workers as if their student loan payments were salary reduction contributions.