PLANADVISER - July/August 2018 - 51

the debt is by making direct contributions to the debt issuer,
Reiskytl says. Typically, these are monthly contributions up
to a lifetime ceiling, perhaps of $5,000 or $10,000. This helps
greatly with retention, he says.
Several of Mercer's customers with high turnover are
looking to student debt refinancing programs, says Neil
Llyod, head of the company's U.S. defined contribution
(DC) and financial wellness research, in Vancouver, British
Columbia. " An individual at an organization is likely to stay
until he gets his loan paid off. For [these people], it is such
a big issue that it can align them with the organization, "
he observes.
With unemployment at 4%, " we are approaching or are
at full employment in the U.S., " Beecher says. " With tenures
at companies averaging 18 months and the cost of replacing
workers who leave costing 1.5 to two times their salary,
employers cannot rely on the old playbook. "
Retention of its largely Millennial work force is the
reason why Millennium Trust Co. rolled out a student
loan debt repayment program, from Fidelity Investments,
four months ago, says John Samaan, senior vice president
and head of human resources (HR) with Millennium, in
Oak Brook, Illinois. The custodial company surveyed its
employees last year and found this was the No. 1 benefit
they wanted. Millennium expected 10% to use the program,
but the take-up rate is 20%, " and, as we hire more people
who come out of school, that will rise, " he says.
There are additional, creative ways that employers can
address the student loan debt issue, Reiskytl says. Abbott
Laboratories, for example, is not paying off its workers'
student loans, but diverting the match money they would
otherwise have received in their 401(k), he says.
Aon Hewitt is also discussing creating " life planning
accounts " with employers, he adds. " We recognize that,
when we work with employers, student loan debt is only
one aspect of a broader financial issue, which includes
paying for college, creating an emergency fund, saving for
the purchase of a home or any one of a myriad financial
challenges people face, " he says. " We are talking with many
employers about life planning accounts. "
The goal of this last approach is to encourage employees
who have decided to first pay down their student loan debt
and then contribute to their 401(k) to do both simultaneously,
taking a loan from their retirement plan account to
pay off the debt. " We have mathematically modeled this
scenario and found that, after five or 10 years, an individual
can end up with significantly more retirement savings than
if he had gone the other route, " Reiskytl says.
Comparing Options
" Advisers can definitely play a critical
role in helping
plan sponsors decide which approach they want to take,
as well as with the implementation of the program-
[e.g.,] conducting a vendor search and providing ongoing
management of the platform, which they can charge for, "
Reiskytl says. " The primary benefit an adviser can derive
from this is helping sponsors make the best use of the money
they spend on benefits, and to serve as a trusted adviser. "
Essex Financial as yet has no clients offering the repayment
benefit but is in discussions about its merits with 15
companies that are struggling to recruit talent, says James
Sullivan, vice president and financial adviser with the advisory
firm, in Essex, Connecticut. However, one issue causing
sponsors to hesitate is there currently are no tax breaks for
companies that provide such a repayment program, he says.
" That is pending legislation, which would be a big boon for
this, " he says.
Another factor for advisers to consider, Sullivan adds,
is that, while 4% of companies offer a student loan repayment
benefit, this doubles among companies with 40,000
employees or more. As with 401(k) plan design features,
employee benefit features tend to move down-market-a
fact worth keeping in mind, he says.
Additionally, industries such as engineering, medicine
and law, with highly educated employees, are showing
great interest in the programs, says Meera Oliva, chief
marketing officer at Gradifi, a student loan repayment platform
company in Boston. " Employees are incredibly grateful
for this benefit, so it raises their engagement [in overall
company benefits], " she says.
If a sponsor is worried about the cost of a student loan
repayment program, it should know that some of the
companies adopting them pay for them with the money
from unused benefits, says Laurel Taylor, founder and CEO
of Boston firm FutureFuel.io, a digital matchmaker of sorts
for highly skilled employees wanting help to pay off student
debt and employers willing to give it. " Education reimbursement
budgets are 60% underutilized, so employers are
simply repurposing them, " she says.
Employers are looking for benefits that " help employees
in ways that are meaningful to their lives, " notes Ashwini
Srikantiah, vice president of emerging products at Fidelity
in Boston. This is why Fidelity rolled out its student loan refinancing
and repayment program, this year. This program
" is really helping people in ways they need it and truly
value, " she says, and is a benefit Fidelity expects will become
increasingly popular in the years to come. -Lee Barney
KEY TAKEAWAYS
* Low unemployment, increasing student loan debt
and interest in financial wellness, taken together,
are prompting some employers to consider offering
student loan debt repayment programs.
* Advisers can help retirement plan sponsors select
from the various ways to approach student loan debt
repayment, help them assess and choose vendors, and
monitor the programs on an ongoing basis, all for a fee.
* If the cost is an issue for an employer, an option is to
reallocate the company's benefits budget.
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