Interim guidance issued by IRS on employer matching contributions made to retirement plans related to employee student loan payments
On August 19, 2024, the IRS issued interim guidance for sponsors of 401(k) and similar retirement plans that provide, or wish to provide, matching contributions based on eligible student loan payments made by their participating employees.
For the first time, employers are permitted to provide matching contributions for employees based on their payments on student loans according to the notice posted on the IRS website that references Section 110 of the SECURE 2.0 Act of 2022.
The 2022 legislation permits employers with a 401(k) plan, 403(b) plan, governmental 457(b) plan or SIMPLE IRA plan to provide matching contributions based on student loan payments, rather than based only on elective contributions to retirement plans, in plan years beginning after Dec. 31, 2023.
Plan-Administration Issues
Using a question-and-answer format that includes several illustrative examples, the notice addresses a variety of plan-administration issues. Among other issues, the notice addresses:
- General student loan matching contribution eligibility rules (including dollar and timing limitations).
- What is required for an employee certification that student loan matching contribution requirements have been met.
- Reasonable student loan matching contribution procedures that a plan may adopt.
- Special nondiscrimination testing relief for 401(k) plans that include student loan matching contributions.
The notice applies for plan years beginning after Dec. 31, 2024. In the notice, the IRS said it plans to issue proposed regulations providing further guidance on section 110, but that plan sponsors may rely on the notice until the proposed regulations are issued.
Public Comments
The IRS welcomes public comments on this notice. Comments may be submitted electronically via the Federal eRulemaking Portal at www.regulations.gov (type “IRS Notice 2024-63” in the search field on the Regulations.gov home page to find this notice and submit comments). Alternatively, comments may be submitted by mail to: Internal Revenue Service, Attn: CC:PA:LPD:PR (Notice 2024-63), Room 5203, P.O. Box 7604, Ben Franklin Station, Washington, D.C. 20044.
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