SECURE Act 2.0: The Retirement Revolution Starts Now

On Friday, lawmakers passed the $1.7 trillion omnibus spending package — and with it, gave the green light for major changes to how Americans save for retirement.

Included among these new guidelines — which were first proposed in the long-awaited SECURE Act 2.0 — are rules that require employers to automatically enroll workers in employer-sponsored retirement savings plans, boost catch-up contribution limits for older participants, offer and expand tax incentives to sponsors and savers, and expand access for part-time employees. But perhaps the most groundbreaking change is a provision that allows employers to match an employee’s student debt payments as a tax-advantaged contribution to their retirement plan. 

This policy marks the start of a new era in financial wellness for the two-thirds of college-educated Americans who carry student loan debt. After all, a quarter of the 30 million Americans who are eligible for but not enrolled in their employer’s retirement plan cite their student loans as the reason they don’t participate, and even those who are enrolled save significantly less than their non-indebted peers. 

And for plan advisors and sponsors, the passage of the SECURE Act 2.0 unlocks an unprecedented opportunity to reach millions of new participants and increase contributions from millions more. Now that this once-in-a-lifetime moment has officially arrived, here’s what retirement stakeholders need to know about what this legislation means for the industry:

It drives deeper ROI — across multiple objectives

Student loan retirement match programs will bring millions of would-be participants in from the sidelines and spur millions more to increase their contributions. But a closer look at who these employees are reveals that increased participation isn’t the only business objective that the SECURE Act 2.0 will help stakeholders achieve.

• Create a more inclusive workplace: Women and people of color are most likely to have unmanageable amounts of student debt and least likely to have adequate retirement savings
• Reach across generations: The SECURE Act 2.0 will close the gap between employers and Millennial and Gen Z workers, who owe the most student loan debt and churn at a higher rate than other generations 
• Relieve burnout: 8 in 10 professionals say their student debt causes “significant” or “very significant” stress and is also the reason they don’t save enough for retirement

It’s a long-term solution with immediate impact

Recent policies enacted to support student loan borrowers focus mainly on short-term relief — including President Biden’s plan for federal student debt forgiveness, which is currently blocked pending legal challenges that are slated for review by the Supreme Court in February. 

Of course, a Court ruling that allows the program to proceed would be an exciting step forward. But for most borrowers, that outcome is only a bandaid: Biden’s relief plan only forgives a fraction of the average borrower’s outstanding balance, doesn’t offer any help to borrowers entangled in high-interest student debt from private lenders, and doesn’t guarantee forgiveness for future borrowers. 

In contrast, student loan retirement match programs offer a long-term, sustainable path to financial wellbeing. Not having to choose between paying off college debt and saving for the future means that today’s youngest — and most indebted — borrowers have a chance at building the estimated $3 million nest egg they’ll need for a comfortable retirement. And in the immediate future, the SECURE Act 2.0 breaks down barriers to financial mobility by making it easier to build savings, make investments, and become a homeowner — milestones that 4 in 5 borrowers say their student debt has delayed. 

It’s not an “if you build it, they will come” situation

Today’s college-educated workforce is more than eager for help with balancing the aspiration of retirement security with the pressure of student debt. The SECURE Act 2.0 can make this a reality — but student loan retirement match programs still aren’t an “if you build it, they will come” situation. 

Like any employee benefit, implementing a student loan retirement match program will take intentional planning. But between the other considerations prompted by the SECURE Act 2.0 and the fact that retirement benefits have been out of reach by so many for so long, stakeholders should be especially thoughtful in order to maximize enrollment and continued engagement. Digital-first processes will be critical to smoothly syncing loan payment records and retirement accounts while keeping employee eligibility info up-to-date, breaking through to first-time participants will require segmented promotions, and employees will need personalized education and support to optimize their repayment plan alongside their employer’s matched retirement contribution.