Only 22 percent of Arkansans over the age of 25 hold a bachelor's degree. Arkansas ranks 43rd nationally in per capita income. It's easy to connect the dots and identify the obstacles that hinder economic growth and prosperity in Arkansas. Solutions, big and small, are harder to come by.
I frequently travel across the state meeting with companies and chambers of commerce to see how the University of Arkansas can be a better partner on economic and social impact issues. In my travels, I ask business leaders what keeps them up at night. I'm told that recruitment and retention of a skilled workforce looms large. Predicting the workforce needs of tomorrow, in an increasingly high-tech environment, only magnifies the concerns.
It’s time for the state’s employers, large and small, to foster a culture of investment in Arkansas’ children through College Savings Plans.
A bright future for our state requires that we take advantage of every available tool and that we commit, above all else, to grow our own. Post-secondary education must be the expectation for every child, rather than the exception.
Arkansas companies have a track record of providing leadership for increased educational attainment. Over a decade ago, Murphy Oil Corp. established a college-going culture for local students with the El Dorado Promise scholarship program. Walmart and Sam's Club recently announced a new subsidized education benefit program for its associates who pursue degrees in business or supply chain management. Countless other Arkansas companies from J.B. Hunt to Tyson Foods to small family-owned, main street businesses have contributed millions in scholarship dollars to support students at our state's public and private colleges and universities.
What's next? It's time for the state's employers, large and small, to foster a culture of investment in Arkansas' children through College Savings Plans.
College Savings Plans -- also known as 529 plans -- are an investment in a child's future education that can be used for four-year and two-year colleges or for technical schools. These plans are a win-win for both the employee and the company. There is virtually no cost to the companies to facilitate payroll deductions as a voluntary employee benefit. Companies can go one step further by establishing a match or other direct contribution programs as an investment boost. Tax incentives are available to offset the company's contribution costs.
Families that have known about 529 plans and could afford to invest have been saving for college for a long time. Thanks to 529 plans, they have done so with considerable tax advantages. However, despite the fact that paying for higher education is a top concern for many families, nearly three out of four Americans do not know what a 529 plan is.
By educating employees about 529 plans and offering streamlined registration and payroll deductions for investments into 529 accounts, companies can play a role in changing the expectations for the next generation, particularly for potential first-generation college students.
Taking part in 529 accounts inspires families to think differently about the possibilities for higher education for their children. The results are stunning. Students who benefit from 529 plans are three times more likely to attend college and two and a half times more likely to graduate than their peers without savings accounts. Remarkably, even when the savings account balances are relatively small, the mere existence of such accounts changes the family conversation about higher education. When family conversations change, children's expectations for their futures also change.
As long as money is used for a qualified college expense such as tuition and books, a 529 plan is a tax-free investment. When money is set aside in a 529 plan, there is no federal income tax while the money grows. There is no federal income tax when the money is pulled out to pay for a college or trade school. Additionally, Arkansas offers up to a $5,000 annual state income tax deduction when an employee invests money into a 529 account.
University of Arkansas employees have multiple options to set up direct deposits to fund college savings accounts for their children. Combined with financial literacy education for our employees and the community, we are providing a new pathway for positive change.
As one of the region's largest employers, the U of A knows this is a small but meaningful step toward changing expectations. We look to our business partners to join us in this effort.
Whether the goal is to future-proof our state economy with an innovative and educated workforce or to empower individuals and communities through meaningful access to education, we will step together toward those goals.
Commentary on 11/07/2018
Print Headline: Employers can influence attitudes about higher ed