- New Chipotle benefit emphasizes employee financial wellness. Eligible employees can earn 401(k) matching contributions of up to 4% for making student loan payments.
- SECURE 2.0 made it possible for employers to offer this benefit. The legislation offers businesses new ways to promote employee financial well-being, particularly for lower-earning workers.
- These benefits are a useful recruiting tool. Supporting employees' financial wellness boosts mental health, increases productivity, and reduces the likelihood that employees will leave their positions.
A new financial wellness-focused benefit at Chipotle will help employees pay off their student loans while also saving for retirement, rather than having to choose between the two.
The Student Loan Retirement Match program is one of several new benefits Chipotle recently announced that are tailored toward employees' financial and mental health, while also aimed at recruiting and retention among its largely Gen Z workforce.
Chipotle will match employees' student loan repayment amounts with annual contributions to their 401(k) of up to 4% of their salary.
Employees become eligible for Chipotle's 401(k) match — either through student loan payments or direct 401(k) contributions — after 12 months of employment and 1,000 hours worked.
The program's match stops once an employee has paid off their student loans, but those employees can continue to receive a 401(k) match of up to 4% at that point by contributing to their 401(k). Employees can also contribute to their retirement account while receiving the student loan match.
Chipotle's new benefit stems from the Securing a Strong Retirement Act (SECURE 2.0 Act of 2022). One of the main provisions of the legislation is providing an optional pathway for employers as of Jan. 1 to reward workers' student debt repayment efforts with matching contributions to an employee retirement account — a 401(k), 403(b), 457 or SIMPLE IRA.
Such loan payments are treated using the same formula as contributions from employees’ paychecks. For instance, if an employer's policy calls for matching 401(k) contributions dollar-for-dollar up to the first 4% of salary, then the same policy would apply to the loan-payment match. Program rules also require matching contributions to have the same eligibility and vesting rules.
Addressing the Needs of Younger Employees
More than 73% of Chipotle employees are Gen Z, and these new benefits seek to address the unique needs of that generation.
A total of 66% Gen Z respondents in a 2023 Intuit study said they're not sure they'll ever have enough money to be able to retire, and 73% said the current economy makes them hesitant to set up long-term goals. The generation is struggling to build credit as well, in part due to student loans and increased credit card debt.
“Gen Z has led the charge in reshaping our society's approach to mental health, while simultaneously being cited as having the most debt,” said Ilene Eskenazi, chief human resources officer with Chipotle. “We want to provide comprehensive compensation packages that address the needs of our current and future workforce.”
Millennial employees are also a leading target demographic for workplace benefits related to student loan repayments — and, to a smaller degree, every generation in the workforce can benefit. More than 5 million adults in their 50s have student loan debt, with an average balance of more than $44,000.
“We are focused on providing our current and prospective employees with clear pathways to advancement,” Eskenazi said. “By offering new benefits that support their mental and financial well-being, these individuals are more likely to join or stay and grow with us too.”
Because vesting rules under the student-loan perk stay the same as other 401(k) match contributions, employees may be more likely to stay with their current employer for at least the length of the vesting period.
Employers should be aware that the responsibility lies with them to require employees to show proof-of-loan contributions before matching can be set. This added layer of administrative tracking has given rise to new options for doing so by third-party plan administrators and financial benefits and investing platforms.
Promoting Financial Wellness
“Employees must prove they've made student loan payments to receive the retirement savings match,” said Barrett Scruggs, vice president of workplace financial well-being at SoFi at Work, which is partnering with Chipotle to help administer the new benefit. “The IRS isn't requiring verification in 2024, but they likely will down the road, so it's smart to get a system in place.”
As with any voluntary benefit, participation in student loan retirement match programs will vary based on each workplace's demographics and current retirement plan options, but Scruggs sees the benefit option as a timely tool.
A recent SoFi study found that 68% of employees have been affected by financial stress, spending more than nine hours per week at work dealing with issues related to their finances.
Workers who are struggling with student loan debt are also twice as likely to consider leaving their jobs, according to the ADP Research Institute.
Scruggs also noted that supporting financial health and student debt repayment is a key equity tool for employers, citing the disproportionate impact of student loan debt on women and Black, Latino, and LGBTQ+ individuals.
“Offering broad-based financial well-being programs that are designed to be flexible to meet the needs of your diverse workforce shows support for all employees, not just the highest-paid employees, in making progress on their financial goals and aspirations,” he said.
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