Workers could save for retirement while paying off student loans
SECURE Act 2.0 would boost savings ability
Americans saddled with student debt who have trouble saving for retirement could get a major boost, but it’s up to Congress to do its job – and quickly.
Congress has until year-end to pass the SECURE Act 2.0, a package of proposed retirement changes to help Americans save more for retirement. Tucked into the broad package is a measure that would allow employers to count employees’ student loan payments toward their retirement match, effectively increasing retirement contributions for those employees. As of now, companies can only match employee contributions.
Student loans have become a flashpoint, with the Biden administration saying it wants to forgive as much as $20,000 in student debt for qualified individuals to give them a chance to, among other things, save for retirement. Graduates with student loans accumulate 50% less retirement wealth by age 30, according to a 2018 study by the Center for Retirement Research at Boston College.
“Interestingly, graduates’ retirement plan assets are not sensitive to the size of their student loans, suggesting that the simple presence of a loan looms large in their financial decision-making,” the Center for Retirement Research said.
What is SECURE Act 2.0?
Earlier this year, the U.S. House of Representatives passed the Securing a Strong Retirement Act of 2022, and the Senate approved The Enhancing American Retirement Now Act, or EARN and the Retirement Improvement and Savings Enhancement to Supplement Healthy Investments for the Nest Egg Act, or RISE & SHINE. These three bills are the basis for the SECURE Act 2.0, which builds on the 2019 SECURE Act.
The 2019 SECURE Act included giving part-time workers better access to retirement benefits and increasing the age when required minimum distributions from certain retirement accounts must
start to age 72 from 701⁄2.
How would this affect me?
SECURE Act 2.0 is meant to help Americans save for retirement, but one particular proposal that would allow companies to contribute to 401(k) plans for an employee making student debt payments could help solve a problem affecting millions of people.
Eighty-four percent of adults said student loans limited the amount they’re able to save for retirement, according to a 2019 study by Massachusetts Institute of Technology Age Lab and financial services organization TIAA. Among those who weren’t saving for retirement at all, 26% said it was because they had to put their money toward student loans.
“Employees, including those who are not in a position to contribute at all to their 401(k) accounts because of student loans, who participate in the new program could accumulate tens of thousands of dollars in their 401(k) accounts over a decade, which could be worth hundreds of thousands of dollars at retirement,” insurance company The Travelers Cos. said in a release announcing its Paying It Forward Savings Program in 2020.
The program considers student loan payments when determining the company’s 401(k) contribution. “That demonstrates the importance of starting to save for retirement early in order to realize the benefit of compounding returns over time,” Travelers said.
Though some companies have launched programs like Travelers’ to help their employees, Congress is formalizing guidance in the SECURE 2.0 Act to make it easier for all businesses to do so.
Details like start dates, compliance requirements, tax treatment and whether nonprofit organizations and government employers could offer the benefit have yet to be determined, but both Democrats and Republicans support the idea that Americans shouldn’t have to choose between paying off education debt and saving for their futures. They say workers should be able to do both.
How could such a plan work?
Abbott Labs was the first to launch such a program in 2018 with clearance from the IRS. Its Freedom 2 Save program allows employees who contribute 2% of their pay toward their student loans to receive 5% of their pay in their 401(k) even if they don’t contribute a penny to that retirement savings account. Since then, about 1,900 have signed on, and other companies have followed suit.
“We were hearing from our employees it’s hard to participate in the 401(k) match when they have a monster student loan to pay off,” said Jenny Guldseth, chief human resources officer at Allianz Life, which launched its Student Loan Retirement Program in 2020. “We wanted to help them and show that we care for our employees, about their personal and professional lives. We knew it would be really meaningful, especially among lower-paid employees.”
Allianz Life assesses an employee’s student loan payments and determines how much the company will contribute to their 401(k) account, up to the full 7.5% of eligible pay match. About 2% of employees eligible for the program participate, Guldseth said.
“Once I got into my career, I got super into saving and paying down that (student) loan and trying different ways to pay it down,” said Lauren Childers, Allianz Life compliance analyst. When she started working in February of 2021, she learned about the company’s student loan/401(k) match program during her onboarding and enrolled.
“I continued to make payments on my student loan and watch that balance dwindle down and knew on the backend I was going to get a lump payment in the first quarter of 2022 into my 401(k),” she said. Allianz accepts uploaded pictures of employees’ student loan payments as documentation and makes an annual payment into the 401(k).
“It was just nice knowing that I was like ‘Ok, I’m going to throw all my money into this (debt payment) and next year, I’ll have an extra bonus amount from the company for those months I wasn’t putting money into my 401(k),’ ” Childers said.
Other proposals in SECURE Act 2.0
Proposals supported by the House and Senate in the three bills passed by the chambers include:
Automatic enrollment into new company retirement plans
Raising when required minimum distributions must start to age 75 years from 72
Increasing catch-up contribution limits for people above a certain age that’s still being determined
Financial incentives for contributing to a plan
Expanded access to retirement plans for long-term, part-time workers
Expanded access to the Saver’s Credit (a tax credit for contributions) for lower- and middle-income workers
Easier access to retirement accounts for emergency situations
Differences must still be reconciled into a final bill for a congressional vote. If passed, it’ll be sent to the president to sign into law. This all must happen by year-end. Otherwise, the entire legislative process would need to start over with the next Congress in January.
“It’s a tight window for passage, but it’s still likely because it’s such a bipartisan piece of legislation,” said Dave Stinnett, a principal who heads Vanguard Strategic Retirement Consulting.
ALABAMA Montgomery: A U.S. District Court judge sentenced a 36year-old man to 60 years in prison for human trafficking and ordered him to pay more than $950,000 in restitution.
ALASKA Stebbins: The community continued to receive donations from around the state after the town’s only grocery store burned in a fire last week, Alaska Public Media reports.
ARIZONA Phoenix: Jim Kolbe, a Republican congressman who represented a heavily Democratic region of the state for more than two decades and was a proponent of gay rights, has died. He was 80. Kolbe served in the Arizona Legislature before being elected in 1984 to Congress, where he often was at odds with other Republicans over his support for free trade and an immigrant guest worker program.
ARKANSAS Crawford County: Arkansas State Police troopers arrested Johnson County Sheriff Jimmy Stephens on suspicion of of illegal possession of guns and drugs during a traffic stop, according to reports.
CALIFORNIA Los Angeles: A coyote ambushed and injured a 2-year old girl outside her home in a daytime attack before her father chased the animal off, her family said. The girl suffered scratches and bruises in the attack and was treated at an emergency room, where she received the rabies vaccine.
COLORADO Fort Collins: Amy Parsons, a former longtime administrator at Colorado State University, has been named the sole finalist to become the university’s next president by the CSU System Board of Governors.
CONNECTICUT Stamford: A driver struck and killed two pedestrians believed to be in a crosswalk and was later arrested after trying to flee, police said.
DELAWARE New Castle County: An armed person led officers on a lengthy chase that involved multiple carjackings and gunfire – and ended when the suspect was fatally shot, Delaware State Police said.
DISTRICT OF COLUMBIA Washington: A vacant warehouse in the 2700 block of Martin Luther King Junior Avenue caught on fire, WUSA-TV reports. Residents across the district could see plumes of smoke as crews worked to battle the blaze, according to the news outlet.
FLORIDA Tampa: The police chief has been placed on leave after a video emerged of her allegedly flashing her badge from the passenger seat of a golf cart to get out of a traffic ticket.
GEORGIA Savannah: A teen was shot by a 42-year-old man while he was campaigning for Raphael Warnock for the runoff election outside the man’s home, according to Savannah Police’s preliminary investigation. The teen had non-life-threatening injuries.
IDAHO Boise: The director of the city’s police watchdog group has been placed on administrative leave, the mayor announced. The decision to place Office of Police Accountability Director Jesus Jara on leave is in response to ongoing concerns with his professional judgment and a lack of confidence in the actions of the office, Mayor Lauren McLean’s office said in a news release.
ILLINOIS Chicago: A woman accused of killing and dismembering the owner of a boarding house where she lived has pleaded not guilty to murder and other charges in the slaying.
INDIANA Indianapolis: Gov. Eric Holcomb has returned home after being hospitalized for treatment of pneumonia, his office said over the weekend.
IOWA Des Moines: Some of the most popular food vendors at the state fair will not be returning next year after a state audit determined they underreported thousands of dollars in sales.
KANSAS Topeka: Some of the nation’s most prominent drug companies and pharmacies forced Kansans to pay exorbitant costs for insulin, Attorney General Derek Schmidt argued in a lawsuit.
KENTUCKY Kenton County: A man has been convicted of strangulation and domestic violence, three years after he was one of hundreds pardoned during former Gov. Matt Bevin’s last days in office.
LOUISIANA New Orleans: Officials say a woman injured six sheriff’s deputies while refusing to exit a plane at an airport Thanksgiving Day, The Times-Picayune/The New Orleans Advocate reported.
MAINE Bangor: A jury awarded a now-retired state trooper $300,000 after finding that the state police retaliated against him when he raised concerns about the agency’s intelligence gathering work.
MARYLAND Chesapeake Bay: The Chesapeake Bay is getting about $33.8 million in conservation grants. The National Fish and Wildlife Foundation announced the grants to support the restoration and conservation of the bay watershed. The 104 grants will leverage more than $30 million in matching contributions to generate a total conservation impact of more than $64 million.
MASSACHUSETTS Boston: Federal prosecutors have charged a man accused of threatening a physician who cares for transgender children. He was arrested in Texas by the FBI and is expected to appear in federal court in Massachusetts at a later date. Authorities say the targeted physician works for a national LGBTQ health education center based in Boston.
MICHIGAN Bay City: The city agreed to pay $1,000 to a driver to settle a lawsuit about marking tires to catch parking violators. The deal followed a declaration in August that a similar practice in Saginaw was illegal. U.S. District Judge Thomas Ludington said chalking tires without a warrant violated constitutional protections against unreasonable searches. Jody Tyvela received tickets at least six times in 2016-17. Without having time meters, parking enforcers marked tires to determine who was parked too long in downtown Bay City.
MINNESOTA Moorhead: A 25-yearold man has been arrested after a woman was found dead in her house. The man was being held in jail in North Dakota, the Star Tribune reported.
MISSISSIPPI Gulfport: A man who burned a cross in his front yard to intimidate his Black neighbors pleaded guilty to a hate crime in federal court, the Justice Department announced.
MISSOURI Dellwood: A man has admitted that he stole almost $200,000 by collecting his mother’s Social Security benefits for 26 years after her death. Reginald Bagley, 62, pleaded guilty to a felony charge of stealing money belonging to the United States, the U.S. Attorney’s Office in Eastern Missouri said in a news release.
MONTANA Montana City: A onestory home that caught on fire has an estimated $300,000 in damage, the Helena Independent Record reports.
NEBRASKA La Vista: A former employee at the Oriental Trading Co. has been sentenced to prison for leaving a noose on a floor scrubber that a Black colleague was set to use.
NEVADA Reno: A tiny toad at the center of a legal battle over a geothermal power project has officially been declared an endangered species, after U.S. wildlife officials temporarily listed it on a rarely used emergency basis last spring.
NEW HAMPSHIRE Jackson: Police have arrested a man that they say was involved in the murder of a 23-year-old woman last month.
NEW JERSEY Trenton: Gas prices dropped again in the state as the cost of oil edged lower amid fears of economic slowdowns around the globe. AAA Mid-Atlantic says the average price of a gallon of regular gas in New Jersey on Friday was $3.63, down 12 cents from the week before. Drivers were paying $3.43 a gallon on average a year ago at this time.
NEW MEXICO Albuquerque: The state is relaxing requirements for some high school students by eliminating the need to pass standardized tests as a way to demonstrate they’re ready to graduate, the state Public Education Department said. The announcement applies to students on track to graduate in 2024.
NEW YORK Albany: The state health commissioner will resign Jan. 1 after 13 months in the job to return to Harvard University’s T.H. Chan School of Public Health. Mary Bassett said in a statement that she was “leaving now so the next commissioner can have the chance to lead this great department for a full 4-year term under the leadership of Gov. (Kathy) Hochul.”
NORTH CAROLINA Moore County: Authorities believe vandalism may have caused a power outage that affected thousands of customers Saturday night.
NORTH DAKOTA Regent: Three people were injured after a small plane made a “hard landing” in a field, the Bismarck Tribune reports. The mishap downed power lines and caused traffic on Enchanted Highway to be diverted, according to the news outlet.
OHIO Columbus: Red Oak Community School says an internal dispute over security prompted a last-minute cancellation of a weekend children’s storytelling event featuring performers in drag amid a planned protest by a far-right group.
OKLAHOMA Oklahoma City: The state is seeing high levels of influenza-like illness for the second week in a row, according to a map from the Centers for Disease Control and Prevention, and the Oklahoma City area is seeing the fourth-highest levels of flu activity in the nation, per a Walgreens analysis.
OREGON Astoria: The listing agent for the Victorian home featured in the “The Goonies” film said last week the likely new owner is a fan of the classic coming-of-age movie about friendships and treasure hunting, and he promises to preserve and protect the landmark. The 1896 home with sweeping views of the Columbia River flowing into the Pacific Ocean was listed in November with an asking price of nearly $1.7 million.
PENNSYLVANIA Philadelphia: The city’s elected prosecutor asked a state court to halt a Republican-led effort to remove him from office, arguing that the process ended when the Legislature’s two-year session ran out earlier in the week.
RHODE ISLAND Exeter: Actor James Woods, known for his “Family Guy” cameos and conservative political views, is challenging his neighbor’s effort to build a home at the edge of Boone Lake. Woods is a native Rhode Islander, and his family has owned property on Boone Lake for decades. The 75-year-old actor is suing the Exeter Zoning Board in state Superior Court over its approval of a variance that would clear the way for his neighbor to build a home on undeveloped waterfront land.
SOUTH CAROLINA Spartanburg: The county is taking steps to build its own animal shelter after using Greenville County’s shelter for 11 years.
SOUTH DAKOTA Sioux Falls: A man is charged with threatening a state official and judge after he allegedly faxed a message to a local TV station saying he planned to kill Gov. Kristi Noem and allegedly emailed a threat to a judge.
TENNESSEE Nashville: Gov. Bill Lee is considering allowing express toll lanes on highways and tripling a fee for electric car owners as he targets his first big push after winning reelection – paying for tens of billions of dollars in roadway projects.
TEXAS Austin: Victims of the Uvalde school shooting that left 21 people dead have filed a lawsuit against local and state police, the city and other school and law enforcement officials seeking $27 billion due to delays in confronting the attacker, court documents show. The lawsuit, filed in federal court in Austin last week, says officials failed to follow active shooter protocol when they waited more than an hour to confront the attacker inside a classroom.
UTAH Zion National Park: Park officials announced they are settling in for a toned-down winter schedule. After a busy Thanksgiving holiday weekend, park managers stopped running the park’s shuttle buses and opened the main Zion Canyon to regular vehicle travel.
VERMONT Montpelier: The secretary of state’s office will conduct a routine post-election audit of the general election results in seven randomly selected communities this week. This year’s audit will be of the results in Burlington, Dover, Fair Haven, Mount Tabor, Newport City, Richford and Waitsfield.
VIRGINIA Mathews County: The county board is moving ahead with plans to deed the public land under a Confederate statue on the historic courthouse green to a private preservation group to prevent the statue from being taken down in the future.
WASHINGTON Kitsap County: Supporters of the Republican candidate for sheriff plopped down a $31,000 cash deposit for a hand recount of the roughly 124,500 ballots cast in the election they lost last month, an effort a fundraising appeal described as for “election integrity.”
WEST VIRGINIA Kanawha County: Residents affected by an August flood are frustrated that federal emergency aid is not coming. The Federal Emergency Management Agency denied Kanawha County assistance last week. The agency declared the county did not have enough widespread damage to be approved for a disaster declaration.
WISCONSIN Janesville: A message spray-painted on a two-story rental home accuses a tenant of not paying her rent. The tenant said she considers the spray-painted message “slander,” but does not dispute that she has not paid rent in some time. She told The Janesville Gazette the property has maintenance violations and she doesn’t think people should have to pay for housing that isn’t kept up. Her landlord has denied putting the message on the house, but says he won’t remove it.
WYOMING Jackson: Avalanche activity was reported at Snow King Mountain Resort, Jackson Hole News & Guide reports. Snow King officials were doing avalanche mitigation and warning skiers to be careful, according to the news outlet.