Offering A College Savings Plan As An Employee Benefit
Offering great benefits is one of the best ways to attract talent to your business, reduce employee turnover and boost employee morale all at the same time. Common benefits include health insurance or a company car, but have you considered a college savings plan?
When you are choosing what benefits you should offer your employees, you need to think about what is most important to them. For most people, that is their family, which is why a college savings plan is such a great benefit to offer. Not only do you keep your employees happy, but you’re also helping the next generation to find new opportunities, so it’s a win for everybody. If you think that a college savings plan is a great benefit to offer your employees, here’s everything that you need to know to get started.
Different Types Of Savings Plans
Before you do anything else, you need to consider the kind of savings plan that you want to offer your employees. A 529 savings plan, often called a qualified tuition plan, is a great way to save money for college and it has some good tax benefits. Anybody can pay into a 529 plan on behalf of the person that will eventually have access to it, including family members and employers. Although the contributions will be taxed, the beneficiary will be able to take the money out tax-free as long as they are using it to pay for college.
There are 2 main types of 529 plan available to you; prepaid tuition plans and education savings plans. A prepaid tuition plan allows you to pay for college at current prices, so even if the cost skyrockets in the future (which it is likely to do), the beneficiary doesn’t have to pay the new prices and they can use the money in their 529 savings account to cover the cost of tuition. This is a great option but most plans have state residency requirements, so the beneficiary will have to attend a college in their home state.
An education savings plan allows for more freedom over which college the money is eventually spent on, but the beneficiary cannot pay current college rates and will have to pay whatever the rates are in future. The money is put into investments so it will grow, but depending on how prices change, the beneficiary may still struggle to afford college.
Calculate Your Contributions
Once you have chosen a plan, you need to work out how much you are going to put in. You can use education financing calculators to determine how much you will need to contribute to cover the full cost of college and decide whether you can afford this. In most cases, you will not be able to and you will need to reduce your contributions.
At this point, you also need to consider how much your employees are going to contribute. Are you going to match their contributions in full or will you only match half? This will be a voluntary benefit because not all of your employees have children, so it’s worth discussing with them beforehand what kind of plan they consider to be fair.
Setting up a college plan for your employees is a great benefit to offer and it will definitely help to improve your ability to attract the best talent to your business.
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