More employers are adding a 401(k) plan match for employees paying student loans

Companies can now offer their employees a “match” on their student loan payments in the form of a contribution to their 401(k) plan – and a small but growing number of employers are taking advantage of this option.

Traditionally, companies have only paid a 401(k) match to employees based on their voluntary contributions to the workplace retirement plan. For example, an employee who chooses to save 3% of their annual salary in a 401(k) can receive a 3% match from their employer.

Now companies can treat an employee’s student loan payments as a contribution to the 401(k) plan.

Federal law allows employers to provide a match based on an employee’s student loan payments. Employees generally do not have to contribute to the 401(k) plan to be eligible for the funds.

The measure, part of a package of pension changes called Secure 2.0, came into effect in 2024.

The goal of the policy is to help employees tackle two competing financial obligations: paying off debt and saving for retirement at the same time.

More than 100 companies have implemented the benefit to date, covering nearly 1.5 million eligible employees, according to data from Fidelity, the nation’s largest 401(k) plan administrator.

They include “some of the largest companies in the U.S.,” such as Kraft, Workday and News Corp., Jesse Moore, senior vice president and head of student debt at Fidelity, said in an email.

“Much more [are] shows strong interest in offering it in 2025,” Moore said.

About 5% of employers have already added the benefit, according to upcoming survey results from Alight, one of the largest retirement plan administrators in the US.

A further 12% of employers say they are “very likely” to adopt it by 2025, while 29% are “fairly likely” to do so, according to Alight. In September, 122 employers were surveyed, with a total of 11 million employees.

Interest in this benefit has grown in large part because of Secure 2.0, Rob Austin, head of thought leadership at Alight, said in an email.

Comcast is among employers adding a student loan 401(k) matching benefit in 2025. A Comcast spokesperson said offering the benefit will help employees manage “their long-term financial well-being” in a tax-efficient manner.

About 90,000 U.S. workers are eligible for the match, up to a maximum of 6% of their eligible annual income, the spokesperson said.

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Some companies also see the match program as a way to attract and retain graduates in competitive fields, experts said.

“We’ve heard from many employees who are struggling with student loans,” especially those early in their careers, the Comcast spokesperson said. ‘We are trying to build a value proposition that is satisfactory [workers’] needs.”

The student loan relief is also available to companies that sponsor other types of workplace retirement plans, such as government 403(b) or 457(b) plans or SIMPLE IRAs, according to to the Tax Authorities.

According to Brian Dobbis, head of retirement solutions at Lord Abbett, a money manager, the maximum amount of “qualified student loan payments” is generally the annual salary deferral or contribution limit. That 401(k) limit amounts to $23,000 in 2024 for employees under the age of 50.

Here’s a common example: A 30-year-old joins a 401(k) plan in 2024. The employee chooses to contribute $18,000 to the plan. If they also pay $8,000 on their student loans that year, only $5,000 ($23,000 minus $18,000) of those repayments is eligible to be matched, Dobbis said.

The employee’s final match amount is determined by the employer’s respective match limit, typically set at approximately 3% to 6% of an employee’s annual salary.

Of course, companies can structure the benefit slightly differently from each other.

Employers had started offering 401(k)-linked student loan benefits even before Secure 2.0.

Healthcare technology company Abbott has offered a similar benefit since 2018 through its ‘Freedom 2 Save’ program, which was thought to are the first of its kind. The company secured a private letter ruling from the IRS to do this.

Since then, more companies have followed.

In 2022, for example, about 1% of all 401(k) plans offered or planned to offer a match based on student loan payments, according to an annual survey by the Plan Sponsor Council of America, a trade group. By 2023, that share had risen to about 2%, according to the group’s latest poll of 709 employers, due to be published this month.

“Pharmaceutical companies are among the early adopters, likely because Abbott pioneered this idea, and competitors followed,” says Alight’s Austin.

The share has risen the most – from 2% in 2022 to almost 5% in 2023 – among the largest companies, i.e. companies with more than 5,000 employees, PSCA found.

There appears to be “an increased interest” among companies with a large pool of college-educated workers, said Hattie Greenan, PSCA research director.

“We will continue to see this number slowly increase as those companies look for ways to differentiate their benefits packages to compete for top talent, and as some of the administrative complexities are resolved,” Greenan said.

However, most companies are still on the sidelines.

For example, 55% of employers say it is “not at all likely” to add the provision by 2025, according to Alight’s research.

There are a few reasons why companies might not want to implement the measure, says Ellen Lander, founder of Renaissance Benefit Advisors Group, based in Pearl River, New York.

First, employers may already be offering another education benefit to their employees. Further, companies, especially those with much higher incomes, may not feel they need the benefit if there is no evidence of lagging 401(k) participation, even among those with student debt, she said.

Some employers may already make a non-elective contribution to employees each year, such as a profit-sharing contribution, even to employees who don’t participate in a company 401(k), Lander said.

Lander said one of her clients viewed the student loan policy as “unfair” because it only applied to a certain subset of employees, those with student debt.

She said none of her clients have chosen to adopt it yet.

“I hope every client discusses this with their advisor,” Lander said. “For me, it’s something you should definitely consider. And then you have to get into the weeds: do you need it?”

Disclosure: Comcast owns CNBC parent company NBCUniversal.