The Setting Every Community Up for Retirement Enhancement (SECURE) 2.0 Act created a new benefit where employers can provide matching employer contributions to certain types of employer-sponsored retirement plans, including 457(b) and 403(b) plans, based on employee’s student loan repayments. Under this new benefit, as employees pay down their student loans, their employer will provide matching contributions to their retirement plan even if the employee is not making their own retirement contributions. The underlying purpose of these new student loan matching programs is to help employees who have student loan debt and who may not have the financial means to contribute to their retirement plan when they have to prioritize paying down student loans.
The IRS recently released Notice 2024-63, which provides interim Q&A guidance for employers about the student loan matching benefit. Here are the big takeaways from the Notice:
- A qualified student loan payment (QSLP) includes a loan to pay higher education expenses of the employee, the employee’s spouse, or the employee’s dependent.
- The employee must have the legal obligation to pay for the QSLP and must actually pay for the loan. If the employee is a guarantor on the loan, they do not have a legal obligation to pay for the loan unless the primary borrower defaults under the loan and would therefore, not be eligible for the student loan matching benefit.
- An employer cannot limit QSLP to only certain education loans. For example, an employer cannot limit the benefit to loans for an employee’s own education, for a particular degree program (e.g., Bachelor of Arts, Juris Doctor, or Master of Business Administration), or for attendance at a certain educational institution.
- Employers cannot add eligibility criteria for the student loan matching benefit that differs from the eligibility criteria for employees to receive elective deferral matches to the retirement plan or deferred comp plan. For example, an employer cannot require employees to remain employed through the QSLP match allocation date or through the last day of the plan year if that is not a condition for the employee to receive an elective deferral match to their 403(b) or 457(b) plan.
- Only an employee’s QSLP that was made during the plan year is eligible for the student loan matching benefit for that same plan year. The benefit cannot be provided in the current plan year for QSLPs that were made during a different plan year.
For more information, please see IRS Notice 2024-63 (Aug. 19, 2024), available at https://www.irs.gov/pub/irs-drop/n-24-63.pdf.
