SECURE 2.0 student loan match: Employer group urges IRS for more ‘clarity’ for plan sponsors
In August, the IRS provided student loan match guidance, however, the ERISA Industry Committee requests “reasonable procedures” plan sponsors can establish for employees to claim the match.
“The interim guidance was a good start, but regulators can do more to help employers design and execute programs that best serve their employees,” said Andy Banducci, Senior Vice President of Retirement and Compensation Policy at ERIC, on Friday.
“Employees often choose between paying off their debt or saving for retirement. It should not be a choice between one or the other,” said Banducci. “Employers want to match student loan payments with contributions to retirement programs to help meet the needs of their employees. But for these programs to be attractive to employers and employees, the parameters for how these programs operate need to be clear.”
Beginning December 31, 2023, SECURE 2.0 had permitted employers with a 401(k) plan, 403(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 IRS notice applies for plan years starting after December 31, 2024. The IRS said it plans to issue proposed regulations providing further guidance on SECURE 2.0 in the future, but that plan sponsors should rely on this notice until the proposed regulations are issue.
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The IRS notice addresses several plan administration issues regarding matching contributions and student loan payments. For instance, the plan must obtain the following information:
- the amount of the loan payment
- the date of the loan payment
- that the payment was made by the employee
- that the loan being repaid is a qualified education loan and was used to pay for qualified higher education expenses of the employee, the employee’s spouse, or the employee’s dependent
- that the loan was incurred by the employee
However, in the comment letter, ERIC requested clarification regarding:
- the “reasonable procedures” plan sponsors may establish under the statute for employees to claim the match
- “clarification” about the process to be used to certify loan payments
- “permission to exclude employees” under a collective bargaining agreement that does not provide for the student loan match