Forget paid vacation time, health care benefits and free coffee. The Wall Street Journal reports that the latest employee perk to hit the workplace is money for college tuition.
A number of companies are now using 529 plans as a new way to entice and retain employees.
Since last year, Waco Oil & Gas in Glenville, W.Va. has offered employees the opportunity to direct a portion of their paychecks to 529 college savings plans—with the company matching their contributions up to $250 annually per individual. So a family of four could receive $1,000 in matching funds each year.
A plan offered by another company, Dun & Bradstreet Credibility Corp. in Malibu, Calif., matches college savings up to $2,500 for salaried employees ($1,000 for hourly employees), and 15% of workers have already signed up to take part in the program.
“It gets people off the sidelines and saving for college, the same way a 401(k) and company match does for retirement,” Larry Karle, of Longfellow Advisors, an employee benefits consulting firm, told CNN Money.
Still, it doesn’t look like college-cash benefits are becoming a major trend.
Why the Plan May Not Go Mainstream
According to many experts, there’s little precedent for 529 incentive programs, which can seem too complicated to implement, so many companies are hesitant to take the plunge.
“It’s uncharted territory, so there’s not a formula you can fall back on like with a 401(k) telling you how much it’s going to benefit you and how much it’s going to cost you,” said Karle.
Furthermore, the tax laws associated with 529 plans are different than those with a 401(k). Matches to a 401(k) aren’t taxed as income. However, with 529 plans, matches are taxed as income on federal returns, and sometimes on state returns, too.
Nevertheless, as college costs continue to rise and student debt hits record numbers, the existing 529 programs seem like a step in the right direction.
As Dun & Bradstreet Credibility Corp. C.E.O. Jeff Stibel told CNN Money: “Fifty years ago there wasn’t a precedent for 401(k)s—and they turned out to be pretty successful.”