business IRS Issues Interim Guidance on Student Loans and Retirement Plans August 27, 2024 Attention employers…are you up to speed on employer matching contributions made to your employees’ retirement plans for student loan payments? The IRS has issued interim guidance. Here’s what you should know. Employers, looking to reward employees for paying back their student loans? You’re in luck! The IRS has issued much anticipated interim guidance, implementing section 110 of the SECURE 2.0 Act of 2022. Read on. What is SECURE 2.0? The Securing a Strong Retirement Act, H.R. 2954, otherwise known as SECURE 2.0 expands and increases retirement savings and simplifies some existing rules. Visit our SECURE Act 2.0 Knowledge Center for more information on retirement changes that could impact you and your business. What’s new? IRS Notice 2024-63 implements Section 110 of SECURE 2.0, which is elected by the Employer, allows employees with student loan debt to receive matching contributions in their retirement plan based on their student loan payments. Who qualifies for this benefit? Employers with a 401(k), 403(b), governmental 457(b) or SIMPLE IRA plan can provide matching contributions based on student loan repayments. In the past, matching contributions were only available to employees who contributed to their retirement plans. To qualify for the benefit, employees must be making qualified student loan payments due to higher education expenses. What inspired this change? A 2023 Fidelity report shows that two thirds of recent college graduates have been unable to save for major milestones including retirement and marriage due to their lingering student loan payments. Through the SECURE Act, the IRS hopes to spur positive change and help employees build retirement savings while tackling student loan debt. When does the benefit take effect? The optional student debt retirement benefit was effective January 1, 2024. The updated guidance applies for plan years starting after December 31, 2024. What else does the notice address? The notice also addresses several plan administration topics related to student debt retirement benefits, including but not limited to: Guidelines for determining eligibility for student loan matching contributions, covering financial limits and timing constraints.Criteria for employee certifications to verify fulfillment of student loan matching contribution conditions.Practical approaches a plan might adopt for handling student loan matching contributions.Exclusive nondiscrimination testing exceptions for 401(k) plans that integrate student loan matching contributions. The IRS anticipates issuing further guidance on this topic, You can submit comments to the IRS electronically via www.regulations.gov.
