The IRS on Monday issued interim guidance for employers who opt to make matching contributions to retirement plans on eligible student loan payments made by their participating employees.
This opportunity, created under the Setting Every Community Up for Retirement Enhancement Act 2.0, also known as SECURE 2.0, allows employers to provide matching contributions to 401(k) and other retirement plans based on an employee’s payments on student loans.
“The provisions were designed to help workers build nest eggs while still paying off their loans, especially younger workers more likely to carry student debt,” Bloomberg Law reported.
According to the Schwartz Center for Economic Policy Analysis, older workers often are saddled with student loan debt that hampers their ability to be financially secure in retirement.
“The match amount is calculated as if the employee contributed their loan amount to the plan even if they did not make any elective contributions,” Forbes reported.
“The reason for the legislation is simple: those repaying student loans may not be in a position to also stash funds away for retirement. That means that they’re not only missing out on retirement savings — but also the matching contribution.” according to the media outlet. “Under the new law, students can repay their student loans, and employers can treat those repayments as though they were retirement contributions for purposes of an employer match.”
The interim guidance provides direction in a question-and-answer format, addressing common concerns. Key issues covered include:
- General student loan matching contribution eligibility rules (including dollar and timing limitations).
- What is required for an employee certification that student loan matching contribution requirements have been met.
- Reasonable student loan matching contribution procedures that a plan may adopt.
- Special nondiscrimination testing relief for 401(k) plans that include student loan matching contributions.
The notice applies for plan years beginning after Dec. 31, 2024. The IRS is expected to publish additional guidance, but for the time being, employers should look to the interim guidance.
