The IRS has laid out the steps that employers need to follow when they contribute matching student loan payments to employees’ defined contribution plans—a benefit that became available this year. The agency’s latest guidance clarifies the eligibility requirements and the process for certification, delivered in a question-and-answer format to make it straightforward for employers.
This interim guidance applies to plan years starting after December 31, 2024. While the IRS plans to issue more detailed regulations in the future, for now, plan sponsors can rely on the notice issued on Monday.
This guidance is part of the broader SECURE 2.0 Act, passed in 2022, which aimed to strengthen employee retirement savings. The Act introduced several enhancements, including pension-linked emergency savings accounts and expanded auto-enrollment for retirement plans. A key provision relevant to the IRS’s Monday notice is that employers can now make matching contributions to employees’ retirement plans based on their student loan payments. This means that if an employee makes a qualifying student loan payment, the employer can match that amount in their retirement plan, treating it as if it were a pretax, Roth, or after-tax contribution. This provision offers a significant benefit to employees burdened by student loans, allowing them to grow their retirement savings even if they aren’t directly contributing to their retirement plan at the moment.
For employers, this matching opportunity can be a powerful tool in attracting and retaining talent. Companies like Abbott have highlighted the importance of planning and communication when rolling out such benefits. Implementing these matching programs requires careful preparation, often taking six to twelve months. Clear communication strategies are essential, and personalized discussions with employees can help increase engagement and understanding of the new benefit.
The IRS will soon invite public comments on the recent notice, offering employers and other stakeholders the chance to provide feedback before the agency finalizes its regulations. Once the notice is officially published in the Federal Register, the IRS will accept comments for a 60-day period.
In summary, while more detailed regulations are on the way, the interim guidance offers employers a clear path to implementing student loan payment matching in retirement plans, helping employees manage their debt while also securing their financial future.
