May 23, 2019
Student Loan Payments Linked to 401ks
Abbott employee Harvir Humpal
Student loans or the 401(k)?
Young adults have a tough time finding the money for both. Unless they work for Abbott Laboratories.
Employees who put at least 2 percent of their income toward student loan payments will qualify for Abbott’s
5 percent contribution to their 401(k) account – without the worker having to put his own money into the 401(k).
From the company’s point of view, it’s an innovative recruitment tool – and it worked for Harvir Humpal, a 2018 biomedical engineering graduate of the California Polytechnic State University in San Luis Obispo. He joined Abbott’s northern California office in February.
Humpal said his student loans weighed on him after graduation. “It’s very empowering that Abbott is willing to tackle an issue that’s near to my heart,” said the 24-year-old, who works on medical devices used in heart transplants.
He estimates he will pay off his $60,000 student loans about four years early and save $7,000 in interest – without completely sacrificing his retirement savings.
As the cost of college continues to rise and U.S. student loan balances hit $1.5 trillion, an increase in the number of private and even government employers offering student loan assistance is a response to the growing financial burden. An Abbott survey found that 87 percent of college students and 2019 graduates want to find an employer offering student loan relief.
The magnitude of the problem “forces us to focus on our employees’ greatest needs and how we, as an employer, can help them,” said Mary Moreland, an Abbott vice president of compensation and benefits. …Learn More
February 5, 2019
Oregon’s IRA Gets Workers to Save
Luke Huffstutter felt a great sense of relief when the employees of his Portland hair salon started putting money into a state retirement program designed to make saving easy.
This is much better than the “guilt” he felt over many years of desperate attempts – and not much luck – to convince his stylists and other employees to save on their own. He even brought in a financial adviser once to nudge them.
“I have a responsibility to provide them a path to retirement,” Huffstutter said.
Today, 39 of the Annastasia Salon’s 45 employees have joined some 22,000 others across the state of Oregon who’ve accumulated a total of $10 million for retirement through OregonSaves, a state government program being rolled out over time for residents who don’t have savings plans at work.
Oregon was the first state to introduce this type of program, and California, Connecticut, Illinois, and Maryland are following. New York may be next. Mayor Bill de Blasio is proposing a similar program, because more than half of working New Yorkers lack a retirement savings plan at work.
The absence of a retirement plan is a particular problem at small firms, which often lack the money or staff to set up the 401(k) plans common at major employers. OregonSaves, which is mandatory for employers, provides a very low-cost way to automatically enroll workers and send their payroll deductions to personal IRA accounts.
The main stumbling block appears to be that not everyone is as enthusiastic as Huffstutter. Some employers are taking a very long time – more than six months – to set up the payroll deductions, and others that enrolled are showing lower participation rates than the salon. …Learn More