This is the second installment of our series highlighting student loan matching provisions found in SECURE 2.0 and how advisors can work with plan sponsor clients to implement them. Readers can find the first installment here.
When we consider adding the Student Loan Matching provision, we also need to further consider some of the practical items that a plan sponsor will need to be able to manage.
The first consideration is that employers cannot limit which types of education expenses can be included nor can they limit the participants who are eligible to receive matching on QSLPs. If we have a participant who is not deferring to the plan but would be otherwise eligible and they are making QSLPs then we must match them. We can add additional plan requirements for a participant to meet matching contributions, such as including a last day and/or hours requirement, but it cannot be different for QSLP matches than for other plan matching. The participant must submit for matching contributions only for payments made during that same plan year.
Another significant consideration of the QSLP match is the certification by the participant that the payment has been made; that it has been made by them and that it was their responsibility to make this loan payment. They cannot certify that they made loan payments for their child or that they had no responsibility to actually make this payment. Even though the certification is a self-certification at the participant level, plan sponsors could be responsible if they know an employee self-certified to a loan payment they had really had no responsibility for.
The plan sponsor can also have a reasonable deadline on the reporting of a loan payment. The IRS notice says that an employee can have up to three months, but the plan sponsor may want to set that earlier so that they can ensure they have what they need to not only complete the actual match calculation and fund the match but to also guarantee that information is available for any necessary non-discrimination testing. Additionally, plan sponsors can organize multiple dates to have reporting (like on a quarterly basis), but this could result in even more administration for the plan sponsor. The QSLP match itself can be made at a different frequency than the regular match but not less than annually. If the plan sponsor is doing a payroll period employer match, they can fund the QSLP match on an annual basis.
While the employee can self-certify that they have made a QSLP, there are also some certification requirements that a plan sponsor must monitor and is required to collect the following information:
- Amount(s) of loan payment
- Date(s) of loan payment
- That the payment was made by the employee
- That the loan being paid was a qualified education loan and for the employee, spouse or dependent
- That the loan was incurred by the employee
Because of this requirement for a collection of information, a once-a-year certification might be best for a plan sponsor, otherwise they would be obligated to collect the information each pay period. Some other items a plan sponsor needs to be aware of is the vesting schedule of the QSLP match, which must be the same as the regular employer matching contributions to the plan. The loan repayments made by the employee actually count toward the annual limit on elective deferrals (the 402g limit). The participant cannot exceed the limit (at $23,500 for 2025 without catch-up contributions) when totaling actual elective deferrals and the QSLP match.
Many employers may initially be intrigued by this optional plan benefit, but it’s to the benefit of the advisor and consultant community to be prepared during discussion with all the considerations that are present. During the amendment process, the TPA or recordkeeper team (if bundled) will ask these questions to the sponsor and have them decided on in advance. This not only makes the process easier but ensures that there are no pitfalls that arise during the amendment process that could have changed, prioritized, or even terminated the conversation earlier in the process if the appropriate considerations were discussed.
SEE ALSO:
Student Loan Matching in Retirement Plans: Tips for Advisors and Clients
Theresa Conti started Sunwest Pensions in 1998 and sold it to July Business Services in 2023. Theresa also holds many designations including a QKA with ASPPA, APR with NIPA, CPFA with NAPA and an ERPA with the IRS. Theresa also volunteers frequently with many industry associations including ASPPA, NIPA and WIPN along with writing regular articles for Plan Consultant Magazine and speaking engagements at industry conferences. She also serves on the board of Junior Achievement of Arizona and the Fountain Hills Community Foundation.
As Theresa enters the next chapter of her career, she partnered and launched a podcast called “Step into the Pivot” and is now working as a Business Coach with TPA Business Owners, a Life Coach with women in the retirement industry and providing Leadership Training. Theresa will also continue to provide technical knowledge and support to plan sponsors and financial advisors.
Christina Tunison is a Financial Advisor & Retirement Plan Consultant with LPL Financial based in the Washington, D.C. metro area. She has almost twenty years of specialized retirement experience and is dedicated to assisting organization executives manage their role as retirement plan sponsors and help their employees prepare adequately for retirement.
