PLANADVISER - January/February 2019 - 44

beyond(k)
" Some may disagree and say it might be OK, but, personally,
I would not advise a safe harbor plan sponsor to [offer
the benefit] in the absence of other guidance, " Holdvogt says.
Likewise, the benefit model used by Abbott may not work
for 403(b) plans. Randy Lupi, regional vice president at AXA
Advisors in Cleveland, points out that many 403(b) plans-
especially those not governed by the Employee Retirement
Income Security Act (ERISA)-do not offer an employer
match contribution.
Holdvogt says an analysis of the impact 403(b) plan rules
would have on the plans if they offered the benefit should be
done before encouraging sponsors to adopt the model.
There are other ways plan advisers can help employees
eliminate student debt. For example, Gradifi's SLP [Student
Loan PayDown] Plan lets an employer make regular contributions
toward paying down an employee's student loan
loans do, but Perkins loans do not, he says. And advisers can
warn employees that refinancing their student loans with
a private bank or other financial institution will disqualify
those loans from a federal loan forgiveness program.
If a nonprofit employee enrolls in a public-service federal
loan forgiveness program, he must remain a nonprofit
employee for at least four years, making him less apt to jump
ship and go to the for-profit world-something employers
like, Lupi adds. And when a borrower enrolls in one of the
income-driven repayment (IDR) plans and starts paying $100
a month vs. his previous $600, he can redirect his savings.
" People have said, 'I thought I couldn't save for retirement
until I got my student loans under control,' " Lupi says.
When AXA looks at participants in 403(b) or 457 plans
who are enrolled in an IDR program, he says, the average
contribution is $7,200 per year-much higher than the
national average of around $2,900.
According to Healy, because student loan
" Advisers should be aware that a lot
of change is coming-potentially
more broad-based guidance from
the IRS, and potentially legislation. "
debt. At no cost to the employer, Gradifi Refi gives employees
immediate access to student loan refinancing lenders that
have made exclusive offers, to help these workers reduce
monthly payments and get out of debt faster.
BenefitEd has launched Employee Choice, a program that
allows employees to split their employer-matched retirement
funds to pay down their student loan debt.
Further, Healy cites SoFi and Peanut Butter as additional
student loan repayment benefit providers with which
advisers can form relationships and partner.
Then there is education. Advisers can educate employees
about refinancing options and any such benefits the
employer offers. Lupi, whose clients are mostly educators,
stresses that there are loan forgiveness programs, which
many employees are unaware how to use.
Nonprofit employees who qualify-i.e., based on adjusted
gross income (AGI) vs. debt-can take advantage of a publicservice
federal loan forgiveness program. Lupi says, a couple
that uses their joint AGI may not qualify but that an adviser
can inform them about filing separate income tax returns so
they may qualify.
For the public-service loan forgiveness program, an
enrollee has to make 120 payments-which need not be
regular-and the remaining loan balance is forgiven taxfree.
The difference in a federal loan forgiveness program for
a corporate employee is that the payment is usually spread
over 20 to 25 years and the balance that is forgiven is taxable.
According to Lupi, advisers can also explain to employees
which loans do and do not qualify for loan forgiveness. Federal
repayment benefits are still new, it is hard to
measure their impact on retirement plans.
However, he says, NFP has clients for which it
has seen a bump in retirement plan participation
when a student loan refinance benefit, or
especially a student loan repayment benefit,
has been implemented.
The Future for Student Loan Benefits
Holdvogt says the IRS PLR did not provide guidance
about how such a benefit would apply to different
types of plans and about the technical issues for nondiscrimination
testing.
The ERISA Industry Committee (ERIC) has already asked
the IRS to issue a revenue ruling that would broaden the
reach of the guidance to enable all sponsors of 401(k) plans
to make similar contributions.
Holdvogt also points out that lawmakers have introduced
legislation that could potentially amend the IRC to
directly allow what is described in the private letter ruling.
" Advisers should be aware that a lot of change is coming-
potentially more broad-based guidance from the IRS, and
potentially legislation. We will see the dam breaking and
may employers adopting this benefit. We have not seen the
end of this, " he says. -Rebecca Moore
KEY TAKEAWAYS
* An IRS private letter ruling to Abbott permits the
company to make 401(k) contributions to employees
who are paying down student loan debt.
* Helping workers eliminate student debt is an important
first step to getting them on the path to save for retirement
and can help an adviser distinguish his practice.
* Refinancing options are available, as well as a federal
loan forgiveness program for those with federal
student loans.
42 | planadviser.com January-February 2019
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