Walgreens plans to roll out a student loan 401(k) match program, the company announced Oct. 2. The pharmacy chain is the latest organization to take advantage of a new federal provision that allows employers to contribute to workers’ retirement accounts based on payments they make toward their student debt.
Under the new benefit, which will be available to eligible employees starting in January 2025, Walgreens will contribute up to 4% of workers’ eligible compensation to their 401(k) accounts when they make student loan payments.
“With the rising costs of education, too many individuals are forced to make difficult choices between repaying student loans and investing in their future through retirement savings,” Walgreens Boots Alliance EVP and CHRO Elizabeth Burger told HR Brew via email.
The option will allow “team members to pay down their student loans while still taking full advantage of the company’s existing matching program,” she said.
Focus on pharmacists. Walgreens estimates that roughly one-third of its workforce has financial debt from higher education, and Burger cited concern specifically for pharmacists, “who typically face significant student loan debt due to the extensive higher education required for their profession.”
More than 43 million Americans have student loan debt, and payments on federal student loans resumed after a three-and-a-half year pause last October. It’s unclear if President Joe Biden’s plan to cancel or reduce student loans for more than 25 million Americans will go forward, as it has recently been subject to legal back-and-forth.
Most students who earned doctor of pharmacy degrees borrowed money to help finance their education, according to a 2023 survey from the American Association of Colleges of Pharmacy, with the average student owing $167,711 after their studies were completed. And concerns about inadequate pay arose when some CVS and Walgreens workers walked off the job last fall.
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Though it’s too early to tell what effect the new benefit might have on Walgreens’ worker population, Burger said the hope was that it would help the company attract and retain top talent, as well as support employees’ overall financial health.
Savings via SECURE 2.0. Walgreens is offering this benefit thanks to a provision of the SECURE 2.0 Act that took effect this year and allows employers to make matching contributions to employees’ retirement accounts based on their student loan payments.
Abbott Laboratories has offered a student loan retirement match program since 2018, while Chipotle announced it would roll out a similar program in February.
A study published in February by the Employee Benefits Research Institute and JPMorgan Asset Management found that student loan payments can hinder workers’ ability to save for retirement. Among 401(k)participants earning less than $55,000 a year, those making student loan payments contributed 5.3% of their income to retirement over a three-year period, on average, compared with a 5.7% contribution rate for those not making them.
The authors of the study suggested student loan matching programs could help participants who aren’t contributing to their 401(k) accounts “at least receive the matching contributions to allow them to build up assets for retirement,” but warned this benefit could also “have an unintended consequence” of lowering contributions for some who were already contributing. As such, they suggested employers consider participants “total finances” when advising them on contributions and debt repayment through financial wellness programs.