When Akhia Communications, a public relations and communications firm in Hudson, Ohio, announced it would be rolling out a new student loan matching benefit, employees thought it was too good to be true.
Kelsey Ellashek, one of the firm’s HR generalists, says nearly all of the employees at the 50-person company are millennials, and many have expressed their concern about paying off their student loans.
“We have a lot of people that are out of school and they have communicated that they have a lot of loans,” she says.
But what caught employees’ attention more was how the benefit will work: It allows employees to allocate their matching dollars toward their retirement plan, their student loans or a combination of both.
“It’s a simple way to process it that integrates with our 401(k),” Ellashek says. “It’s going to be user-friendly.”
In about a month, Akhia will start 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. Employers including architecture and planning company SSOE Group and accounting and finance firm Apple Growth Partners also are offering the benefit.
Using Thrive, employers allocate a certain percentage of their salary toward student loan repayment and retirement. The money is taken out of the account monthly and used to pay down student loans. Because Thrive works alongside a 401(k), employers looking to add the benefit don’t have to change their current retirement plan provider, says Thrive CEO David Krasnow.
Charles Mullen, chairman at Apple Growth Partners, wants to offer Thrive to its roughly 110 employees within the next year. Mullen says the employer is waiting for all of the “numbers to make sense within their plan,” but he is excited to offer the benefit. Mullen says that to attract top talent, employers have to offer competitive benefit programs.
“We’re always looking for the most cutting edge employee benefit program out there,” Mullen says. “This is going to to be a game changer for everybody.”
Student loan repayment benefits have become more popular for employers. Providers like CommonBond, Gradifi, Tuition.io, 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 alongside a 401(k). Krasnow says that to his knowledge, Thrive is the only provider to do so.
There are several things to take into consideration before implementing a benefit like Thrive, Krasnow says. First, employers have different options for vesting, or the amount of time a worker must remain a company before receiving their full match.
Krasnow says once the employer’s money is moved out of an employee’s Thrive account to pay down a loan, that money is gone. Krasnow suggests employers simply let that money go. But companies also can elect to have workers pay the unvested portion back or not allow participation until an employee is fully vested.
Another factor employers have to take into consideration before using Thrive, Krasnow says, is whether or not it will impact their retirement plan compliance testing, although this may only be an issue for small employers.
Krasnow stresses that Thrive is not an ERISA plan and is not directly incorporated into 401(k)s. There are no tax benefits to the program, as both the employee and employer contributions are after tax, he adds.
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Krasnow says the private letter ruling did not impact Thrive.
