Abbott Labs Releases Blueprint to Help Employers Offer Student Loan Benefits

With college tuition at a historic high, student loan debt exceeding $1 trillion and the recent resumption of repayments on federal student loans after a three-year reprieve, many employees with student debt are faced with immense financial stress.

In response, Abbott Laboratories—a health company that has also pioneered student loan benefits—is encouraging employers to help employees struggling with student debt with the launch of its Freedom 2 Save blueprint.

In 2018, the medical devices and health care company tackled the student debt crisis with an award-winning Freedom 2 Save program that helps employees pay off their student loans while also saving for retirement.

Through the program, if benefits-eligible employees apply at least 2% of their salary toward paying down a qualifying student loan, they will receive a 5% company contribution into their Abbott 401(k) annually. Employees do not have to put any money into their 401(k) to get this company contribution, allowing them to focus on paying down their student debt while knowing they are still saving for retirement. Before Freedom 2 Save was offered, a 2% employee contribution to the 401(k) would qualify for a 5% company match, and the ratio remains this way.

Abbott’s 401(k) contribution is made approximately 60 days after the end of the calendar year for the prior year’s benefit. Over time, the Freedom 2 Save 401(k) contribution can grow due to tax-deferred investment returns. After 10 years—the typical student loan repayment period—employees could accumulate up to $48,000 in their 401(k) accounts.

Abbott uses EdAssist by Bright Horizons to administer its Freedom 2 Save program, and Alight is the plan’s recordkeeper.

The Abbott Blueprint

The blueprint recently published by Abbott guides employers through the process of developing and implementing a benefit like Freedom 2 Save. Starting in January 2024, due to provisions in the SECURE 2.0 Act of 2022, employers will be able to match student loan payments made by their employees with contributions into the employees’ retirement accounts. This optional provision could make it easier for employers to implement a student loan benefit similar to Abbott’s program.

When creating the Freedom 2 Save program, Abbott had to obtain a private letter ruling from the IRS to offer the benefit.

“The good news is that employers can help relieve some of this burden,” said Diego Martinez, divisional vice president of benefits and wellness at Abbott, in an email response. “But we know implementing these types of employee programs can be complicated; that’s why we developed the Freedom 2 Save blueprint. We want to encourage employers to create Freedom 2 Save-like programs for their own people, because we believe helping employees tackle student loans and save for their future will lead to improved finances and wellness for many people today and in the long term.”

According to Abbott, more than 2,500 total employees have enrolled in the program since its 2018 inception, and more than 1,300 employees were enrolled as of the year’s second quarter—about 3.8% of Abbot’s eligible employee population.

Abbott also found that employees who participate in Freedom 2 Save are 19% more likely to stay with the company.

Student Debt Impacts Retirement Savings

In addition, 46% of respondents said that student loan debt has impacted the amount they contribute to their 401(k). Out of these respondents, 86% said student loan debt has caused them to reduce the amount of money they invest in their retirement plan, 55% said it caused them to stop investing in their retirement plan altogether and 44% said they have withdrawn money from their retirement plan to pay off debt.

During the federal pause on student loan repayments, only 12% of survey respondents said they continued making payments, while 63% have not been paying at all.

A significant majority of respondents (70%) also ranked receiving a 401(k) contribution for student loan payments as the top workplace benefit they would be interested in their employer offering.

Considerations for Plan Sponsors

For companies looking to implement a program similar to Freedom 2 Save, Abbott recommended that plan sponsors and their teams consider some key questions.

For example, it is important to consider the increase in company match funds and in program administration costs. Plan sponsors should also think about how the program will fit in with the company’s overall financial wellness strategy and what resources will be needed to create the program, manage it over time and communicate to current and prospective employees, according to Abbott.

Abbott also advised that plan sponsors need to identify the internal stakeholders necessary to inform and ultimately buy into program. Abbott’s blueprint recommended involving leaders from human resources, finance, legal and communications in the process.

Once internal stakeholders approve the program, the benefits and wellness team can start looking for vendor partners to help set up and implement the program. Abbott said to plan for six to 12 months from concept and approval to execution.

The blueprint also suggested the following steps:

1. Notify your recordkeeper that you’re interested in implementing the SECURE 2.0 student loan provision;
2. Decide if you will allow employees to self-certify that they’re paying their student loans or if you will require documentation of the loan repayments;
3. Check with your retirement plan administrator to see if they have a preferred student loan vendor with whom they work;
4. Assign a project manager to implement, execute and communicate the program;
5. Work with both HR and communications teams to develop a marketing strategy to inform and educate current and prospective employees about the program;
6. Determine if (and how) you want to communicate about the program to external stakeholders, including prospective employees.

“Employees with student loans often have to choose between paying their school debt and saving for retirement,” said Mary Moreland, executive vice president of human resources at Abbott, in a press release. “That’s problematic because people who delay saving for the future will find it hard to catch up. The good news is that employers can help relieve some of this burden with a program like Freedom 2 Save. Our blueprint will help simplify the process.”