Among the tax changes that took effect at the beginning of the year was the federal government’s removal of the credit for post-secondary education and textbooks.
Provinces such as Ontario and New Brunswick have made similar moves as they seek to provide free tuition to students on low and moderate incomes. In those cases, governments are paying for the changes in part by eliminating tuition and education tax credits available to all students.
In the case of the federal government, the tax move also included boosts to student grants that will benefit those from low- and middle-income families. But with rising student debt and tuition more generally, it’s a good time to consider other ways, such as employee benefits, to address the pressures.
According to a recent report by Willis Towers Watson, there has been significant interest in the United States in legislative changes to encourage employers to help their staff with student debt. The proposals include changes that would allow employers to provide assistance with student loans on a tax-preferred basis.
Also on the table is a proposal to allow employers to make matching 401(k) contributions for employees who are paying off student loans, according to the Willis Towers Watson report. It would effectively treat the employee’s student loan payments as an elective deferral to the 401(k) plan and allow employers to provide matching contributions to those who don’t contribute while they pay off their debts, the report noted.
As an article on benefitscanada.com noted last year, U.S. employers have generally been ahead of their Canadian counterparts in providing staff with assistance with student loans. But amid all of the discussion about providing more flexibility in benefits plans, particularly when it comes to the needs of younger employees, employers would do well to consider the ways they can assist.
While there’s a role for the government to encourage employers to provide assistance, changes that would add a significant financial burden on the federal and provincial treasuries may not be in the cards given the fiscal pressures they’re already facing. (Indeed, the benefits industry has already faced down the possibility of changes to the favourable tax treatment of employer-sponsored health benefits.)
But the idea of providing matching contributions to employees’ retirement plans on the basis of their student loan repayments is a welcome one. Doing so would make it easier for those having recently completed their studies to pay off their student debt while still making some headway on their retirement savings.
Governments have made some laudable moves aimed at helping students on moderate incomes in the last year. But with the continuing financial pressures faced by students and new graduates and the focus on flexibility, it’s also time to consider ways employers can add to those efforts.
Glenn Kauth is the editor of Benefits Canada.
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