Debt Relief Assistance: A New Model for Employee Benefits

Debt relief assistance is an often-overlooked, relatively low-cost employee benefit available to any employer. A recent study found that employees were increasingly distracted from work due to debt stress, with 62% of respondents reporting that they would be more likely to stay with an employer that offered debt relief assistance.

Employers seeking to include debt relief assistance in their benefit plan offerings will encounter a wide range of options. Examples include:

• Employers may provide up to $5,250 per year tax-free to assist each employee in repaying the employee’s student loan debt. To qualify as tax-free, the program must be in writing, cannot favor only highly compensated employees and must satisfy other IRS criteria for an educational assistance program.
• Healthcare-related debt benefits focus on both avoiding and managing the debt. Examples include salary-supported loans, emergency savings funds, conversion of unused paid time off to an emergency medical leave bank, varying the employee share of health insurance premium based on wage level, tailoring company health insurance plan offerings to the needs of the particular workforce and employer contributions toward tax-advantaged health accounts such as health savings accounts (HSA), health reimbursement accounts (HRA) and flexible spending accounts (FSA).
• Credit card and mortgage debt are often targeted through offering free access to financial planning resources and counseling, including referrals to debt consolidation services.

Employers seeking to make debt relief assistance part of their benefit offerings should speak with their employee benefits advisor to explore the options that best fit their workforce. The benefits program also should include processes for employees to confidentially access a particular benefit and ask questions about its application to their specific debt situation.

Meet the Author

A. Nicole Stover

Nicole Stover is a strategic business partner to corporate and non-profit clients in all areas of employment law, including mergers and acquisitions, discrimination and harassment, competition and trade secrets, and compensation and benefits.