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Plan sponsor News Corp. added a student loan debt matching program to its 401(k) savings plan because the company recognized student loan debt is a significant barrier to many of its U.S. workers saving for retirement, explains Marco Diaz, global head of benefits at News Corp.
The media company was one of the first large employers to offer Fidelity Investments’ student debt workplace plan.
News Corp. built the student loan debt benefit matching program to work in a similar way to a true-up retirement plan contribution, says Diaz.
The program follows “a year-end reconciliation process,” he says.
In the first quarter of 2024, “we’ll take a look and see how much [employees have] contributed to both the 401(k) and [to their] student loan and to the extent that they under contributed in the 401(k) and therefore didn’t benefit from the full match that the company provides [the plan] will count their student loan contributions in lieu of the 401(k) contribution as … 401(k) contributions,” Diaz explains.
Long-term savings goals, like saving sufficiently for retirement, are known to suffer when debt prevents employees from contributing to retirement plans.
“Given the long-term nature of retirement savings, [participants with debt] might be limiting the amount they’re contributing to the 401(k) to … something less than the 6% threshold that a person would need to get to get the full match,” adds Diaz.
More than two-thirds (67%) of recent college graduates with student loan debt say those obligations prevent them from participating in major life milestones like saving for retirement, getting married or buying a home, finds the 2023 Fidelity Investments College Savings and Student Debt study.
“The whole premise of our 401(k) is to make sure that people have sufficient assets to retire and if student loan debt was a prohibiting factor from getting those assets, then, that was something we sought to cure through a program like this,” says Diaz.
News Corp.’s workforce has responded positively to the program, adds Diaz.
“Our estimates are that about [one-]quarter of our US employee population has exposure to student loan debt, and a subset of that group are potentially eligible for the student loan match opportunity,” says Diaz by email. “We were expecting to see about [one-]quarter of those eligible to sign up, and so far, it’s more like 35%, which we see as a good result. We’re continuing to market the program in hopes even more take advantage of it over time.”
News Corp.’s employer matching contribution formula is 100% on the first 1% and 50% of the next 5%, he explains.
“If you contribute 6%, you will get a 3.5% matching contribution,” Diaz says.
For the total employer matching contribution of 5.5% News Corp. makes a 2% nondiscretionary contribution as well.
Overall, retirement plan participants who are enrolled in a Fidelity student loan debt benefit were projected to boost their retirement balances to $389,371 from $195,248, and double the share of retirement expenses they can cover to 15.5% from 7.5%, shows a Fidelity example of retirement savers experiences.
Fidelity started offering its student debt retirement program, in 2018, following a private letter ruling from the IRS.
News Corp. communicated the program directly to participants, in their monthly employee benefits newsletter and on Instagram, adds Diaz.
“You’re communicating programs like this, not only to people that are already within an organization, but people that you’re looking to bring into the organization as well,” he says.
The SECURE 2.0 Act of 2022 allowed employers to use money already allocated for retirement plans to help employees save for retirement while paying down student debt.
“We couldn’t [previously] implement that style of match on our plan,” explains Diaz. “With the passage of the Secure Act 2.0, allowing plan sponsors to adopt this—basically—it was what we were waiting for. With that imprimatur, we went forward with it.”
Fidelity serves as the recordkeeper to the News Corp. 401(k) plan.
Fidelity has worked with more than 200 employers in the student loan debt matching program. These sponsors have made more than 1.4 million in student loan payments, totaling more than $280 million in payments, shows a 2024 Fidelity Investments fact sheet.
News Corp.’s 401(k) plan uses auto-enrollment, defaulting plan participants at a 3% contribution rate with 1% auto escalation each year to maximum 10%, says Diaz by email.
News Corp. launched the student loan debt matching program to employees in late 2023. The program is open to all employees of News Corp. who are eligible to contribute to the 401(k) plan. Student loans must be taken out in the name of the borrower or on behalf of a child and from a U.S.-based loan service provider to pay for undergraduate or graduate education, says Diaz.
Part-time employees must work 1,000 hours to become eligible for the 401(k) plan.
The News Corp. 401(k) Savings Plan held $2.765 billion in retirement assets for 14,353 participants, shows the plan’s latest regulatory filing to the Department of Labor for the 2022 plan year.
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