Operationalizing SECURE Act 2.0 For Employee Financial Well-Being

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A blueprint for employers to enhance workplace financial culture

In the ever-evolving landscape of employee benefits and competitive compensation packages – both to attract and retain talent – the SECURE Act 2.0 may be a game-changer. Even more, it may actually be good for employees’ well-being.

For employers looking to not only comply with the legislation but also harness its potential to benefit their workforce and the organization as a whole, strategic operationalization is key. By proactively addressing the financial stress of employees, organizations can create a positive ripple effect that enhances productivity, recruitment efforts and retention rates.

Understanding the SECURE Act 2.0

Before diving into operational strategies, it’s crucial for employers to understand the SECURE Act 2.0. The Setting Every Community Up for Retirement Enhancement (SECURE) Act, passed in 2019, introduced significant changes to retirement planning in the United States. Fast forward to today, and it has added more modifications to further enhance retirement security.

One of the major changes includes auto-enrollment and auto-escalation within employer-sponsored retirement plans. Auto-enrollment automatically enrolls employees in the company’s retirement plan, while auto-escalation increases their contributions over time. These features make it easier for individuals to start saving for retirement and gradually increase their savings rate. The SECURE Act 2.0 also increased catch-up contribution limits for individuals 62 and older.

One unique feature of the SECURE Act 2.0 is that student loan payments may now also count as retirement contributions beginning in 2024, allowing employers to make contributions to their company retirement plan on behalf of employees paying student loans instead of saving for retirement. This provision is intended to assist employees who may not be able to save for retirement due to paralyzing student loan debt, and therefore unable to tap into employer contributions to retirement plans.

Just How Bad is the Student Loan Debt Problem?

According to the Federal Reserve, the student loan debt balance in the United States has increased by 66% over the past decade, now totaling more than $1.77 trillion. While many individuals had hoped for much of that debt to be forgiven, loan payments officially resumed last October after a three-year pause.

This meant that more than 45.3 million student loan borrowers would need to add between $200-$300 in monthly payments, which could feel like as much as a 5% pay cut. It’s also important to point out that this is not just a problem for entry- and junior-level employees. Borrowers ages 35 to 49 owe more than $620 billion in student loans, which also includes the highest number of borrowers with over $100,000 in loans. Additionally, there are more than 2.4 million individuals over the age of 62 with student loan debt, owing a combined $98 billion in loans. Clearly, this is a problem that reaches every career level.

As Americans continue to struggle, a survey from Morgan Stanley last year showed that over one-third of respondents didn’t think they would be able to make their payment. As it turns out, a staggering 40% missed their first payment, according to the Department of Education.

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