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Company offers hybrid student loan/401(k) benefit

On Behalf of | Sep 5, 2018 | IRS Issues

Georgia residents and others who are making student loan payments may struggle to contribute to a 401(k) plan. However, one company recently received permission from the IRS to make contributions on an employee’s behalf. It is believed that the company that offers this benefit is a health care company called Abbot. To qualify, an employee must make student loan payments equal to 2 percent or more of his or her yearly salary.

The money that the company puts into the 401(k) plan is considered a tax-free contribution. If the employee received a direct payment to help with student loan payments, that money would generally be considered taxable funds. There currently is a bill in the Senate that would allow pre-tax dollars to be used to help workers pay off student loans. A recent survey found that over 75 percent of employees with student loans wanted their employers to help pay for them. Generally speaking, workers have been open about leaving their current employers for ones that offered better benefits.

Companies are increasingly offering student loan repayment assistance as well as other financial wellness perks. While a financial wellness program won’t directly reduce an employee’s debt, it can help that person better handle the debt that he or she does have. Reducing the stress that debt can cause may allow workers to perform better in the workplace.

People who earn an income are generally required to pay federal income and FICA taxes on them. However, they also must report most other forms of income that they receive during the year. This may include any bonuses or other benefits provided by an employer in addition to wages earned. Individuals who are unsure of their reporting obligations may wish to contact an attorney who can answer their questions.