The Internal Revenue Service (IRS) today issued highly anticipated guidance for plan sponsors wanting to match retirement plan contributions to qualified student loan payments (QSLPs).
Notice 2024-63 , posted by the IRS, implements section 110 of SECURE 2.0, which allows employers to match contributions for employees based on their QSLPs. Beginning on December 31, 2023, the 2022 legislation had permitted employers with a 401(k) plan, 403(b) plan, governmental 457(b) plan, or SIMPLE IRA to offer matching contributions based on student loan payments, rather than solely on what participants contributed to their retirement plan.
The legislation was designed to help employees build retirement savings while paying down student debt. Past research has shown the impact that such debt could have on major milestones—a 2023 report from Fidelity found that two-thirds of recent college graduates say their loans have prevented them from saving for retirement and getting married.
The impact of student loans doesn’t just fall on new college graduates and younger workers, either. Recent findings from the New School Schwartz Center for Economic Policy Analysis (SCEPA) found that over 2.2 million Americans past the age of 55 have outstanding student loan debt that could delay their retirement.
In its notice, the IRS addresses several plan administration issues regarding matching contributions and QSLPs. It confirms that employers must make matching contributions to student loan repayments under the same manner as the plan’s regular match, including same rates and same vesting schedules.
It also contains general student loan matching contribution eligibility rules—including dollar and timing limitations—and guidelines for how an employee should certify to an employer that a loan payment was made.
Furthermore, the IRS elaborates on reasonable student loan matching contribution procedures that a plan could adopt, and notes that there will be special nondiscrimination testing relief for 401(k) plans that include student loan matching contributions.
The notice will apply for plan years starting after December 31, 2024. The IRS said it plans to issue proposed regulations providing further guidance on section 110 in the future, but that plan sponsors should rely on this notice until the proposed regulations are issued.
Comment period and early reactions
Until then, the IRS is welcoming public comments on its notice and on section 110 of SECURE 2.0. According to the agency, it is requesting comments on:
- Whether additional guidance would be helpful relating to passive certification or independent verification;
- Whether, for a plan that provides for QSLP matches to be made more frequently than annually, guidance would be helpful in the case of an employee who 26 receives a QSLP match early in a year before it is known whether subsequent elective deferrals will reduce the employee’s maximum QSLP for the year;
- Whether additional examples of reasonable procedures would be helpful with respect to QSLP matches;
- Whether additional guidance would be helpful concerning the application of the QSLP rules to SIMPLE IRA plans; and
- Whether additional guidance would be helpful concerning the application of the QSLP rules to SIMPLE 401(k) plans.
Comments will be due 60 days following publication of the notice, and can be mailed to the IRS or can be submitted electronically at www.regulations.gov. Comments submitted after this time will be considered as long as it does not delay the issuance of proposed regulations, according to the IRS.
Following the announcement, the ERISA Industry Committee (ERIC) issued a statement applauding the IRS for the guidance. “ERIC’s member companies are committed to the financial wellbeing of their employees, including those with outstanding student loans. That is why we lobbied Congress to enact a tax law change allowing employers to make retirement plan matching contributions on account of workers’ qualified student loan payments,” stated Andy Banducci, senior vice president for Retirement and Compensation Policy at ERIC. “We applaud the IRS for issuing interim guidance implementing this change and look forward to providing technical comments to IRS in the coming weeks.”
Amanda Umpierrez is the Managing Editor of 401(k) Specialist magazine. She is a financial services reporter with over six years of experience and a passion for telling stories and reporting news. Amanda received her degree in journalism and government and politics at St. John’s University. She is originally from Queens, New York, but now resides in Denver, Colorado with her partner. In her free time, Amanda enjoys running, cooking, and watching the latest drama show.