New student loan benefit works with 401k plans


When Akhia Communications, a public relations and communications firm in Hudson, Ohio, announced it was rolling out a new student loan matching benefit, employees thought it was too good to be true.

Kelsey Ellashek, one of the company’s HR generalists, says nearly all of the 50-person company employees are millennials, and many have expressed concern over their student loan repayments.

“We have a lot of people who are not in school and they have made it known that they have a lot of loans,” she said.

But what caught the employees’ attention the most was how the benefit works – it allows employees to use their matching dollars towards their retirement plan, student loans, or a combination of the two. .

“It’s a simple way to deal with it that fits into our 401 (k),” says Ellashek. “It will be user-friendly. ”

In about a month, Akhia will begin offering a benefit through Thrive, a new student loan repayment benefit provider that works with a company’s 401 (k) and allows employers to match funds for student loan repayment. student loans. Employers, including architecture and planning firm SSOE Group and accounting and finance firm Apple Growth Partners, also provide this benefit.

Using Thrive, employers allocate a certain percentage of their salary towards student loan repayment and retirement. The money is withdrawn from the account monthly and used to pay off student loans. Because Thrive works alongside a 401 (k), employers looking to add the benefit don’t have to change their current pension plan provider, said David Krasnow, CEO of Thrive.

Charles Mullen, president of Apple Growth Partners, wants to offer Thrive to his approximately 110 employees over the next year. Mullen says the employer is waiting for all of the “numbers to make sense in their plan,” but he’s happy to offer the benefit. Mullen says that to attract the best talent, employers need to offer competitive benefits programs.

“We’re always on the lookout for the most forward-thinking employee benefits program out there,” says Mullen. “It will be a game changer for everyone.”

Student loan repayment benefits have become more popular with employers. Providers like CommonBond, Gradifi,, Peanut Butter, and Vault, formerly Student Loan Genius, all offer some form of loan repayment to employers. But Thrive is unique in that it works with a 401 (k). Krasnow says that to her knowledge, Thrive is the only vendor to do this.

There are several things to consider before implementing a perk like Thrive, Krasnow says. First, employers have different options for vesting, or how long a worker must stay with the company before receiving full equivalency.

Krasnow says that once the employer’s money is withdrawn from an employee’s Thrive account to pay off a loan, that money is gone. Krasnow suggests employers just let that money go. But companies can also choose to require workers to reimburse the unearned portion or not allow participation until an employee is fully vested.

Another factor employers should consider before using Thrive, according to Krasnow, is whether or not it will impact their pension plan’s compliance testing, although this may only be an issue for small employers.

Krasnow points out that Thrive is not an ERISA plan and is not directly incorporated into 401 (k) s. There is no tax benefit to the program, as employee and employer contributions are after-tax, he adds.

Last year, a private letter from the IRS to an anonymous employer – later confirmed to be Abbott Laboratories – allowed the company to offer a reimbursement benefit under its 401 (k). Experts say it could help other employers deliver similar benefits, although the IRS has yet to release an official policy on the matter.

Abbott Laboratories instituted its own loan repayment program for full-time and part-time employees. Those who contribute 2% of their salary to student loans receive an employer match of 5% of their salary deposited towards their 401 (k). The same match is granted to employees who contribute 2% to their 401 (k).

Krasnow says the private letter’s decision did not impact Thrive.

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