Promoting financial wellness through 529 workplace benefits

Here’s a question we’ve asked ourselves recently: Does an employee earning a low- to moderate-income have anything to gain from participating in a 529 education savings plan? Furthermore, does an employer have anything to gain by offering this benefit to their employees?

Through extensive workplace financial benefits research and the joint efforts of Commonwealth and JPMorganChase, we found the answer to both questions is a definitive yes. Let us explain.

Employees earning low- and moderate-incomes (LMI) have the lowest 529 plan participation rates. In fact, according to data from Sallie Mae on saving for college, parents earning low income are much less likely to save via 529 plans, at only 4%, compared to 37% of parents with higher income that use 529s.

This makes sense, as those earning a lower income tend to have competing financial priorities—including providing for their families’ most basic needs—and 529s are not consistently offered to employees by employers. Additionally, only half of people living in the US are aware that 529 plans exist, and according to J.P. Morgan Asset Management’s College Planning Essentials, 30% of families are not saving for college. In fact, $1.5 trillion in education savings is held outside tax-advantaged 529 plans, with 50% of families just relying on cash.

Offering workers earning LMI a 529 plan is a win-win scenario for employers

Employers can help overcome these barriers by prioritizing and promoting 529s as an optional low cost, effective benefit. In a 2024 national survey of parents living on LMI, Commonwealth found that 96% of parents who did not have a 529 plan expressed interest in opening one if their employer offered a 529 plan as a workplace benefit. This demonstrates that employers are well-positioned to support increased accessibility to and management of the often untapped education savings opportunity.

As employees have diverse and expanding financial needs and savings goals, such as retirement and education savings, broadening the suite of benefits options beyond traditional 401(k)s can help employees meet short-term financial goals while also building long-term wealth and protecting their retirement savings.

Offering this benefit also presents an advantage for the employer, as investments into their team’s financial wellness consistently pays dividends with increased employee productivity, higher rates of retention, and loyalty to the organization. A recent Commonwealth national survey found that workers who were offered employer-sponsored education savings accounts had significantly higher job satisfaction than those whose employers did not.

How 529s protect retirement savings

To state it plainly—pairing traditional savings vehicles like employer-sponsored retirement plans with other benefits like education savings accounts can strengthen employees’ overall financial health and support retention.

When education savings are insufficient, families at all income levels may withdraw funds from retirement savings or take out loans, leading to delayed retirement. In fact, of people ages 25 to 80 who are saving for both retirement and college expenses 58% have had to delay retirement by at least 5 years, while 41% have made withdrawals from their retirement accounts to pay for tuition. Even just a $25,000 withdrawal from retirement accounts to pay for college results in a $80,000 loss in retirement funds after 20 years, jeopardizing long-term retirement security. With 36% of families saving for education in their 401(k) accounts and 21% in traditional or Roth IRAs, there is a notable opportunity to leverage tax-advantaged 529 plans designed specifically for education.

Beyond the benefit of preventing possible early withdrawal from retirement savings for education needs, funds saved in 529 accounts can be directed towards post-secondary education, including community colleges, four-year universities, graduate school, and vocational/trade schools, apprenticeship programs, and even student loan repayments (up to $10,000 per eligible individual). Contributions to these accounts are made post-tax, but capital gains in the market, and qualified distributions for educational expenses are tax-free. The power of compound growth coupled with a tax-free account is key here – with an initial $10,000 investment and $500 monthly contributions over 18 years, families are projected to save over $41,500 more than with a taxable account.

Adding this optional benefit is a relatively light lift for employers

When it comes to educating employees about the benefits of education savings plans, employers can often work with their 529 program managers who will provide employees with resources and information sessions on education savings. They’ll also help workers navigate enrollment, payroll deductions, and contribution decisions made by the employee – reducing the burden on employers.

Some employers take it a step further by facilitating 529 account openings and accepting payroll deductions that go directly into employees’ 529 accounts, in order to further support workers with their savings goals. Three-quarters of 529 plan users make automatic contributions from bank accounts or paychecks, putting college savings and investing on autopilot. Despite this relatively low lift, according to the Society for Human Resource Management (SHRM), fewer than 11% of employers are offering payroll deductions for 529 plans and just 2% are offering a contribution or match.

What offering a workplace 529 benefit looks like in action

JPMorganChase launched Mission: Tuition, a dedicated program that supports employees in understanding and managing the costs associated with higher education, including access to JPMorganChase’s 529 Plan solutions, college planning experts, and a comprehensive suite of educational resources. Since the program’s inception, JPMorganChase has assisted over 10,000 employees in saving and investing for their families’ higher education costs. And with College Planning Essentials, financial advisors and families alike have the latest insights and data at their fingertips to facilitate saving and investing for college. These and other employer strategies around 529 plan engagement can go a long way in helping employees and promoting a regular savings cadence.

“We recognize the significant financial burden of college expenses and in addition to serving advisors and clients every day, it’s important to remember our own colleagues as they too are trying to navigate planning for their children’s education and their own retirement,” said Tricia Scarlata, Head of Education Savings at J.P. Morgan Asset Management. “With Mission: Tuition, our employees have access to the same investments, guidance, and insights we provide our clients to help make informed decisions and save for higher education.”

Taking the next step: Offering workplace 529s

Our research shows that employees want their employers to provide financial guidance and strategies for financial security. We encourage employers to realize the opportunity and positive long-term impact of investing in the financial health of their employees. Existing solutions, like 529 plans, can strengthen an employer’s benefits offerings and commitment to their employees’ financial well-being. Employers that recognize these opportunities give themselves a competitive advantage in an ever-changing job market and support their teams on pathways to financial security.

Be one of many employers stepping up to answer this call by expanding your workplace benefits, including variations of 529 plan assistance, and thinking comprehensively about the financial needs of their teams, helping to plan for short-term expenses and long-term savings goals for employees and their families.