The term Pioneer is defined as “a person or group that originates or helps open up a new line of thought or activity or a new method or technical development.” Every now and then I come across a company that sees it as both a responsibility and opportunity to provide financial wellness within their organization in a more impactful way. Natixis Global Asset Management is one such company. When Natixis announced their student loan repayment benefit nearly a year ago, they knew they were sailing in slightly unchartered waters, and creating a map to financial wellness that other companies might one day follow.
Natixis’ 2015 Defined Contribution survey was a catalyst for identifying the need for the benefit. Of the non-participants, (those who have access to a company-sponsored retirement plan but choose not to participate), surveyed, more than half were not doing so because they have immediate spending priorities. Thirty-four percent of non-participants say they have too much debt to pay off, and 23% percent of those specifically cited student debt.
A linkage between student loans and the retirement savings issue was clear. Studies conducted by Morningstar Advisor reveal that each additional dollar in student loans is associated with a 35 cent decrease in retirement savings. “You can’t think about retirement, without thinking about debt,” says Ed Farrington, Executive Vice President of Retirement at Natixis Global Asset Management. “We decided let’s take the first step as employers and hope that over time, this issue is recognized by policymakers.”
Farrington is referring in part, to a bill policymakers recently proposed in Congress to amend the tax code and make the first $5,250 of an employer contribution towards student loans tax deductible. Rather than wait for policymakers to pass the bill, Natixis took a proactive approach and began offering student debt repayment assistance to its employees. Farrington believes assisting employees in paying off their student loans is much like assisting them in saving for their retirement. “Countries with the best quality of life in retirement have participation from individuals, employers and policymakers,” says Farrington.
Natixis just announced several new features to the student debt repayment assistance benefit based on initial employee feedback. A $1,000 annual benefit will now be available immediately to all employees with any federal or private student loans, eliminating the requirement to have five years’ tenure with the firm. Previously, the benefit was a $5,000 lump sum given to employees at their fifth anniversary with the firm and only federal loans were eligible. “We were spending too much time trying to communicate the program and quickly realized we needed to simplify it,” says Farrington.
One common assumption among many employers, is that student debt only impacts millennial employees, but that is not the case. “A fair percentage of people over the age of 40 still have student loans,” says Farrington. As of now the firm only offers the benefit to employees with personal student loans.
Another update to the benefit includes a payment in the amount of $83.33 per month made directly to the student loan provider up to the life of the loan, or a maximum of $10,000 over a 10-year period, as long as the individual is still employed by Natixis. This payment will be applied to the principal of the loan, thus reducing the interest paid and shortening the term of the loan.
Currently, nearly 20% of Natixis employees are taking advantage of the student loan repayment benefit. The firm also plans to use this benefit in its recruiting efforts. “We are in a time and industry where there is a quest to get the best talent possible,” says Farrington. They have already received positive feedback from new recruits. “The feedback has been that we understand what employees are facing and that the benefit makes us stand out as a company,” said Elizabeth Bartlett, a Natixis spokeswoman.
But does $83.33 a month really make that big of a difference? Aren’t employees concerned about having to pay taxes on their employer’s contributions towards their student loans? We spoke with Charlie Donovan, Regional Director in Sales and an eight-year employee of Natixis. This was his perspective. “I thought it was great for them be thinking so outside the box, and it says a lot about our management team and how much they care about their employees. Being in financial services I think they understand the weight student loans have on their younger employees right out of school, or even employees that have been paying student loans for 10,15, 20 years.”
Charlie graduated from Assumption College with two private loans. “My monthly student loan payments just for myself are currently north of $300, but I also have my wife’s student loan debt as well.” “What’s great about this program is that the money is going every month right to the principal, and right from the company to my loan provider.” Charlie still pays the minimum monthly payment on his loans and is using the contribution from Natixis to help pay down the principal. “It’s going to shorten the time length that I’m going to have these monthly payments dramatically, and it’s really going to help our employees do other things. I have two young kids and now I’m putting away more money towards their 529 [college savings] plan.”
“It makes you refocus on what’s important in life and think about your long term savings and make sure you’re doing enough,” he added. When asked about the additional tax burden it created. “Not a huge concern. The benefit of it going towards my debt outweighed any tax burden. I like that it’s a monthly contribution, so I don’t have to worry about one massive tax bill at the end of the year.”
So far, Natixis’ biggest lesson learned has been how much employees appreciate having a firm that acknowledges this issue. “The response has been visceral, almost emotional at times,” says Farrington. “People go to school to become participants in society. That decision comes with debt, which becomes a major source of anxiety. By addressing this issue, the amount of employee goodwill we generate is enormous.”
For other employers considering this benefit, Farrington offers this. “If it’s on your mind, this is a worthwhile endeavor and definitely worth continuing exploration. There are more templates now for companies to follow, and when implemented it will be worth it.”
If you are interested in career opportunities at Natixis, check out the company’s job board.