On August 19,, the Internal Revenue Service (IRS) released interim guidance (Notice 2024-63) related to section 110 of the SECURE 2.0 Act that allows plan sponsors to make matching contributions for employees’ payment of qualified student loan payments (QSLP match). The provision seeks to improve retirement outcomes for employees who are unable to make retirement plan contributions due to the repayment of student loan debt.
Starting Dec. 31, 2023, employer matching contributions could be made to a qualified retirement plan (401(k)s, 403(b)s, and governmental section 457(b) plans for QSLP payments made by an employee. The notice provides guidance to plan sponsors that they must gather the following information from an employee to appropriately fulfill the requirements to make a QSLP matching contribution:
- Amount of the loan payment
- Date of the loan payment
- That the payment was made by the employee
- The loan payment is related to a qualified education loan used to pay for qualified high education expenses of the employee, the employee’s spouse, or the employee’s dependent; and
- The loan was incurred by the employee
Although this may seem like a lot of information, the IRS provided some administrative relief to assist with this burden. First, plan sponsors can obtain an affirmative certification from the employee for all elements. Second, plan sponsors can independently verify the amount and date that the employee made the payment and that the loan was incurred by the employee. Lastly, a plan sponsor could receive the information directly from the lender and have the employee certify that the repayments are accurate and that the employee incurred the education loan. While this would still require some work from the plan sponsor, the IRS has provided multiple options on how to fulfill the requirements listed above. The notice also addressed the timing of the certifications related to confirming the loan payment is for a qualified education loan and that the loan was incurred by the employee. These items only need to be certified once for each loan and do not need to be recertified annually.
One item to highlight is some restrictions implemented by the IRS. The plan sponsor cannot restrict the type of QSLP that is matched, and the plan sponsor must provide a reasonable opportunity to receive the match to all eligible employees. If a plan sponsor is using a third-party verification service but that service does not extend to certain QSLPs, then the plan sponsor must make accommodations to verify the loan even if it cannot be done by their third-party verification services.
Plan sponsors that offer student loan matching contributions are also entitled to special relief from certain nondiscrimination testing requirements. A plan that has QSLP matching may apply a single test for all employees or a separate test for employees who receive the match and those who do not when calculating the actual deferral percentage of the plan’s highly compensated employees (ACP Testing).
While the interim guidance provides a roadmap for plan sponsors, the IRS noted that they plan on issuing proposed regulations to provide further guidance related to QSLP matching. Multnomah Group will continue to monitor future guidance related to SECURE 2.0.
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