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SECURE 2.0 Student Loan Match Rules Effective 2024

August 24, 2023

Effective 2024, employers may make payments to qualified plans that match qualified student loan payments made by employees. Here’s what you should know.

Are you up to speed on the SECURE Act 2.0 changes to student loan matching contributions? Here’s a closer look at what’s new effective 2024.

What is the SECURE Act 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.

Student loan matching contributions: current rules

Prior guidance stipulated that employers could only make matching contributions to a defined contribution plan based on the employee’s contributions to their retirement plan accounts. Rather than contribute to a retirement plan, many workers with outstanding student loans elected to repay their loans, missing out on valuable employer matching contributions.

Student loan matching contributions: What’s new?

Starting in 2024, upon the optional amendment of the plan by the Employer, an employee’s student loan payments can be considered elective deferrals for matching purposes (401k, 403b, 457b government plans and SIMPLE IRA plans), allowing the employee to receive an employer matching contribution based on their loan payments.

To be eligible for the matching contributions:

  • The employee’s loan payments must be for a qualified student loan to pay for higher education costs (tuition, fees, books, expenses). Room and board, non-credit courses and sports expenses are not eligible.
  • The employee must have been enrolled (at least half time) in a program that leads to a certificate or degree.
  • The employee must certify that loan payments have been made on an annual basis.
  • The employer may rely on the employee certification of payment and is not required to obtain payment and loan documentation support.
  • The annual maximum deferral limit for student loan repayments considered eligible for matching contributions for 2023 is $22,500 401(k)/403(b)/457(b) and $15,500 for SIMPLEs and reduced by any employee elective deferrals. The total annual elective deferral and loan payment amount cannot exceed the Section 402(g) IRC limit.
  • Matching contributions for student loan payments must be at the same rate as those for elective deferrals.

Key considerations for employers

Employers…some important items of note:

  • The eligibility criteria, matching contribution rate and vesting schedule (applicable to student loan matching contributions) must align with those that apply to the plan’s regular matching contributions.
  • As long as they are contributed at least annually, employers can deposit matching contributions to the employee’s 401k less frequently than regular matching contributions.

Questions? Contact us.

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