Benefits March 6, 2019

Travelers to Help Employees Save for Retirement While Paying Down Student Debt

Employee student loan repayments will qualify for 401(k) employer match contributions.

Reported by

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.

For more stories like this, sign up for the PLANSPONSOR NEWSDash daily newsletter.

“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.

Data and Research March 6, 2019

Americans in Tug-of-War Between Early Retirement and Health Costs

Seventy-six percent of those who are financially independent think retiring earlier will help them live longer, yet top concerns about retiring early are outliving their money and health care costs, according to a survey by TD Ameritrade.

Reported by

TD Ameritrade’s Retirement & Health Survey found that for 44% of Americans older than 45, focusing on health and wellness is a primary concern.

Seventy-six percent of those who are financially independent, i.e. with enough savings that they would not need to work, think retiring earlier will help them live longer. Seventy-two percent of those who are financially independent say health is a motivator to retiring early, but 28% say health is a barrier to retiring early.

Get more!  Sign up for PLANSPONSOR newsletters.

Asked what their concerns are about retiring early, 53% of Americans say outliving their money, 46% say unexpected costs for a health emergency, 35% say the economy or their investments changing for the worse, 33% say Social Security changing, 29% say inflation, 19% say unexpected costs to care for family members, 19% say long-term costs for family members and 18% say boredom.

As to the factors that Americans think are keeping them from pursuing financial independence, 57% say health care costs, 38% say uncertain market conditions, 35% say inflation, 34% say longevity, 26% say uncertainty as to whether or not they will receive Social Security benefits, 20% say long-term care costs for a family member, 18% say unexpected death or care for a family member, and 16% say lack of financial knowledge.

Asked what kind of retirement savings they have, 50% say an employer-sponsored 401(k), 50% say a traditional individual retirement account (IRA), 34% say a Roth IRA, 24% say annuities, 15% say a health savings account (HSA), 12% say a solo 401(k) and 4% say a 457 plan.

Seventy-six percent of Americans say they plan to cover health care costs in retirement via Medicare, 51% through supplemental health care insurance, 42% say health insurance, 41% say Social Security and 9% say an HSA. Forty-four percent say Medicare will cover the bulk of their retirement medical expenses.

The Harris Poll conducted the online survey of 1,503 adults age 45 or older with more than $250,000 in investable assets between September 28 and October 6, 2018. The report can be downloaded here.

«