Due to 2022 legislation, employers are not permitted to offer 401(k) and similar retirement matching contributions based on qualified student loan payments (QSLPs). This expands traditional retirement matching, once reserved for elective deferrals, by extending eligibility to student loan payments for plan years beginning after December 31, 2023.
IRS Implementation Guidance
In August of 2024, the IRS released Notice 2024-63 with interim guidance for plan sponsors offering or wish to offer student loan matching contributions. The notice addresses:
- Eligibility rules for student loan matching contributions;
- Employee certification requirements;
- Acceptable plan procedures for matching contributions; and
- Nondiscrimination testing relief for 401(k) plans with student loan matches
Background
The Consolidated Appropriations Act of 2023 includes SECURE 2.0, which builds on the 2019 Setting Every Community Up for Retirement Enhancement (SECURE) Act. Section 110 of SECURE 2.0 lets employers match student loan payments under 401(k), 403(b), 457(b), and SIMPLE IRA plans.
What is a QSLP?
A QSLP is an employee’s payment toward qualified student loans, made within annual limits for education expenses, for themselves, a spouse, or a dependent. It should not exceed certain applicable limits when aggregated with other payments for the year and it must be officially certified for the plan year by the employee.
Action Steps
Plan sponsors should watch for upcoming Treasury and IRS regulations. Until new rules are released, IRS Notice 2024-63 can be followed for plan years starting after December 31, 2024, and rely on good faith compliance for plan years beginning before January 1, 2025. Download the bulletin for more details.
