Offering a 529 plan is one way to entice employees, but it comes with challenges.
Employees want to be valued as people, not just resources. They want to know that their employer cares about their happiness and quality of life, not just their productivity metrics. As more organizations ask for 'round the clock responsiveness and longer hours, workers are demanding that their personal priorities are supported as much as they support your organization's priorities. That's where offering a 529 plan comes in.
Offering a 529 Plan
The cost of higher education is an increasing burden on parents, many of whom also invest heavily in their children's extracurricular and scholastic activities. This means that many of those who contribute to the success of your organization are likely coping with a financial burden previous generations did not have. Financial stress can cause employees to lose focus in the workplace, and be more tempted by recruiters offering even a small increase in pay, regardless of their workplace happiness.
Adding a 529 plan to your benefits package can be a great way to show your employees that you care about their families. It also makes a great addition to a solid health care plan and 401(k) offering. Consider these three as a triage that could guarantee future stability for each individual your employee loves and cares for.
Encouraging Employees to Participate
However, there are a few hurdles to get over — and the biggest one is simply convincing employees to start contributing to the plan in the first place. This problem is quite similar to persuading young employees to contribute to their 401(k) plans, in that the payoff seems nebulous because it is many years away.
The best way to get started may be to focus on onboarding those of your employees who have children and educate them on the various benefits of enrolling and contributing to a plan. Encourage them to start saving now in order to avoid financial hardship in the future. Remind them that saving early can make their child's future much easier.
If your employees are, for the most part, all in one state, there can be many benefits to enrolling them in a geographically advantageous plan. For example, Maine clothing brand L.L. Bean began offering automatic deposits into NextGen, which offers significant benefits to state residents to the tune of a 50 percent match on contributions, up to $300 annually, as The Wall Street Journal (WSJ) notes. NextGen also incentivizes regular contributions with a $100 rebate after the first six automated payments.
It's also important to understand that any contributions you make to the 529 plan your employees hold are made with after-tax dollars, which means they'll owe income tax. This can be a drawback for some, though the benefit of having a growing education fund for their children is generally seen as more than adequate compensation.
For the most part, 529 plans have remained a popular option for saving for higher education because they allow contributors to stow away a large amount of money, and benefit from certain tax advantages, namely state tax breaks and tax-free compounding and withdrawals for qualified expenses. For both you and your employees, it's important to look up your state's benefits and regulations on 529s.
Saving for their children's future is an incredibly important financial decision for parents and relatives of children. As an employer, you can help fulfill dreams of success for families by offering a college savings option — your organization will likely be rewarded by your state for its efforts.