When participating in the Thrive program, a Participant will pay ordinary income tax on both the Employee (their contributions) as well as the Employer contributions.
A) Vesting: When participating in the Thrive program, all contributions will be swept out on a monthly basis and go directly towards the participants Student Loan Repayment
If the company has a vesting schedule with their Retirement Savings Plan, the money that goes towards Thrive will be paid out, and a decision needs to be made. There are 3 alternatives to consider:
1) Allow the money to go out as this is a new, highly competitive employee benefit program.
2) You could restrict inclusion in this plan to those that are 100% Vested.
3) Much like a Tuition Reimbursement program, any participant not vested who chooses to participate in Thrive will be required to sign a Promissory note promising to repay the unvested portion of the employer payments if their employment ends before they would have vested.
B) Compliance Testing: It is possible that participation in the Thrive program could have an adverse impact on a Company’s Retirement Savings Plan. The test it directly impacts is the Actual Deferral Percentage (ADP) Test. This test limits Highly Compensated Employees (HCE’s) to 2% more than the average of the Non-Highly Compensated Employees (NHCE’s). Some ideas on the handling of this:
1) Mid-year testing – The Recordkeeper for the Retirement Savings Plan could run a test to let a company know the results of their Compliance Testing with enough time to adjust the contributions of the HCE’s.
2) NQDC – Companies could consider adding a Non-Qualified Deferred Compensation program do allow the HCE’s to defer a larger contribution.
There is a one-time implementation fee and a 4.50 per participant/per month with an annual plan minimum.