Employee Benefits: A New Tool for Institutionalizing CSAs?

Tuesday, July 7, 2015

This week, AEDI heads to Boston, Massachusetts to participate in the New England CSA Consortium. We will share some of the findings from our recent paper detailing CSA policies in the New England states, as well as facilitate conversation among the states about potential metrics by which to evaluate their children's savings efforts.

One of the trends noted in the paper is the growing interest in employee withholding as a way to encourage household deposits into children's savings accounts, alongside employers' matching contributions, to increase balances and further reward savings. Maine has had considerable success bringing employers--including some large businesses, influential in the state--to the table, while Rhode Island and Connecticut are also considering ways to work through human resources personnel to make college savings a standard part of the benefit package.

While employee benefit provision is not an equitable source of CSA funding, since those unemployed and those working part-time or low-wage jobs obviously have less access to this benefit (70% of American workers report being offered retirement benefits at work, with the highest-income Americans most likely to have these benefits), this approach does hold potential to shift the culture about how we pay for college, to 'piggyback' on existing infrastructure to scale CSAs, and to change the calculus about who should help American families finance their children's education--and when to start.

Human benefit professionals represent a potentially important constituency for the CSA movement; if they come to see college savings accounts as an important part of a benefit 'package', they may develop a vested interest in defending the plans' features, incentives, and availability. As the concept of supported children's savings goes mainstream, the cultivation of such allies--unlikely, at first glance--may prove decisive.

Also of significance is the low marginal cost to deliver children's savings opportunities and incentives through this structure. Human resource personnel already have conversations with their employees about the benefits available to them. The more that they can understand about why children's savings matter, what parents can do, and how employers can play a role, the better-equipped this potential 'army' will be. There are few additional costs to layer children's savings onto this apparatus; even if companies are matching employees' contributions, they could do so with a relatively small percentage of their overall benefit investment. This provision, then, could change the narrative on asset interventions as costly, labor-intensive, or 'hand-holding', replacing it with a frame more conducive to scaling.

Most importantly, however, being offered a vehicle with which to save for one's children's future educations could play a role in changing Americans' expectations about the role of asset development in financing college, the advantages of early preparation, and the need for institutions that facilitate this financial capacity. Particularly if surrounded by accurate information about the cost of college and the benefits of saving, the moment of hire, or of 'open enrollment' could help to pull back the curtain of obscurity in which college financing is currently swathed, and encourage American families, instead, to think about higher education as one of the critical transitions requiring long-term saving.

Entities like LEAF College Savings are actively promoting college saving as part of the employee benefit 'experience'. They talk about college savings options as an essential tool in corporate competitiveness, and they are developing platforms and integrated technologies that make it easier for employers to bridge employees' saving, as well as to complement it with employer contributions. These business development efforts are complemented by the work of places like those in New England, as well as Promise Indiana and others who are reaching out to employers, often one at a time, to share the value of college saving and convince businesses to use this as one of their tools with which to develop the economy and invest in the future.

As CSA champions look for ways to capitalize the universal, progressively-funded, scaled children's savings innovations research suggests could have tremendous educational and economic effects, employers--and the benefits they offer--should be part of the conversation. They are certainly not the answer--we need to look at pivoting from debt-dependent financial aid, repurposing existing transfers to be asset building, and inverting our upside-down tax investments--but they may help to prompt thinking about saving for children, in places and at times otherwise unlikely.

And, when it comes to engineering a transformation as radical as the one needed to make the American Dream viable again, we need everything we can get.

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