In a competitive marketplace with unemployment rates as low as they have been in 50 years, employers need to get creative about the benefits they offer to attract top talent. With national student loan debt totaling 1.6 trillion dollars, some companies have turned to student loan reimbursement as a perk to attract workers deep in debt with student loans. Of those owing money on student loans, at least half are under age 30. The indebtedness makes it increasingly challenging for younger people to buy a home, start a family, or buy larger ticket items such as a new car.
Businesses Rising to Meet a Growing Need
Eight percent of companies offered this benefit at the beginning of 2019, up 50 percent from the four percent that offered it in 2015. The great news for job seekers is that nearly one-third of companies that responded to an April 2019 survey conducted by the Society for Human Resource Management plan to implement this benefit by 2021. The even better news is that the government is considering a measure that would give a tax break to companies that assist employees with their student loan debt.
Employer Participation in Repayment Act
This act has bipartisan support and sponsorship. More than 130 members of Congress have lent their support to the bill, including presidential candidates Amy Klobuchar and Seth Moulton of the Democratic party. Sponsors and supporters propose that the bill would make it a tax-free benefit for employers to offer this benefit to employees.
Currently, both employers and employees pay taxes on any contribution made towards student loan repayment benefits for employees. For example, if an employer provides the employee with a $100 benefit, the company might actually pay $110 to cover taxes on the benefit while the employee might only receive $70. The proposed bill would make the payment tax-free for both parties.
Other Details About the Proposed Legislation
Both federal and private student loans would be eligible if this bill passes both the House and Senate. Introduced on February 7, 2019, Congress referred it to the House Ways and Means Committee on the same day. It has not yet published an expected date of passage or denial. Employer participation is voluntary; however, backers of the bill feel strongly that employers currently hesitate to offer this benefit due to the tax burden it imposes on them.
Does Student Loan Repayment Assistance Make Sense for Your Business?
Perhaps you’re considering adding this benefit to attract new candidates or to show appreciation for your current employees, but need to understand the tax obligation first. You might also want to wait until this bill passes. In either case, Nolan Accounting can help you make the most advantageous choices for your company and your employees. Please contact us to request a consultation today.