Q: I am an HR Director of a growing biotech company in the Boston area. We are looking to grow and hire additional staff in 2011 and beyond. Most of our additions to staff will require advanced degrees. Retention is important to us. We offer a very generous benefits package. Many of our employees are well-compensated and are well-educated. Our employees worry about paying for college for their dependents. We are exploring the possibility of adding some type of tuition benefit for the dependents of our employees. We have looked at the Massachusetts Educational Financial Authority’s U.Plan. This plan offers participants the ability to pre-pay college tuition and fees at today’s rates. Do you have any information on this plan and if other companies are offering such plans?
A: Retention is back on the table. I am seeing many of my clients lose top performers and re-think the mindset of “It’s a recession… where will our employees go?” Well, some employees are finding other opportunities and their employers are left scratching their heads.
The U.Plan is a prepaid tuition plan. Approximately 80 Massachusetts colleges and universities participate in this plan.
I talked to a college planning expert, Ron Foisy, College Advisor at College Planning Strategies, LLC (CPS). Foisy explains the U.Plan, “The contribution each year buys a fixed percentage of the future cost of tuition and fees. You can contribute once each year, during MEFA’s open enrollment period.” You can no longer contribute once the student reaches the sophomore year of high school.
Foisy adds, “The major advantage of this program is that it locks in tuition at today’s prices. From 1999-2009, average cost of attendance increased 92%, while the S&P 500 declined 9%. It is a challenge to keep up with rising college costs when your investments are declining. This program takes the price increase out of the equation. An additional benefit is that this may encourage employees to save now for college, relieving the stress down the road.”
However, the plan has some disadvantages. With thousands of colleges and universities available to high school student, this program is limited to approximately 80 schools within Massachusetts. If the student decides to attend a school outside of the 80 or so identified, the parent or guardian can withdraw their money plus interest (CPI). Also, the dollars in the accounts are not liquid. If circumstances change, it is difficult to access these funds. Foisy warns, “These funds are considered parent assets, and will count against the student in the financial aid formula.” College Planning, as a work/life benefit, is a fast growing segment of the marketplace, due to the exploding costs, and increasing complexity.
I have not seen companies offering this type of plan to their employees as a benefit. However, it may be helpful to contact MEFA to request more information.