New guidance on student loan payment matching contributions

The IRS recently provided initial guidance in the form of questions and answers (Notice 2024-63) on the new rules added by the SECURE 2.0 Act that allow employers to make matching contributions to an employee retirement account based on qualified student loan payments (QSLPs).

The new rules apply for contributions to Section 401(k) plans, Section 403(b) plans, governmental Section 457(b) plans, and SIMPLE IRA plans for plan years beginning after Dec. 31, 2023. Under the rules, a QSLP is generally defined as a payment that was made by an employee in repayment of a qualified education loan, which is generally defined as any indebtedness incurred by an employee solely to pay qualified higher education expenses. The expenses must be all of the following:

• Incurred on behalf of the employee, the employee’s spouse, or any dependent of the employee as of the time the indebtedness was incurred
• Paid or incurred within a reasonable period of time before or after the indebtedness was incurred
• Attributable to education furnished during a period during which the recipient was an eligible student.

There are several other conditions, and the employee making the loan payment must certify annually to the employer making the matching contribution that payment has been made on the loan. In addition, QSLPs to Section 401(k) and 403(b) plans are generally limited to the annual limit on employee elective deferrals under Section 402(g) (generally $23,000 for 2024, adjusted annually for inflation), reduced by an employee’s elective deferrals for the year.

Notice 2024-63 addresses, among other guidance, the QSLP certification requirement and provides that the following items of information must be received by a plan (including a third-party service provider acting on behalf of the plan) to satisfy the certification requirement:

• The amount of the loan payment
• The date of the loan payment
• That the payment was made by the employee
• That the loan being repaid is a qualified education loan and was used to pay for qualified higher education expenses of the employee, the employee’s spouse, or the employee’s dependent
• That the loan was incurred by the employee

The notice also provides guidance on how this information can be provided, including, among other approaches, through an affirmative certification by an employee. 

The IRS indicated that the notice generally provides guidance only on “discrete issues” under the new rules in order to assist plan sponsors in implementing QSLP match programs, and that it anticipates issuing proposed regulations at some point in the future.

The guidance applies for plan years beginning after Dec. 31, 2024. However, the IRS indicated that, for plan years beginning before Jan. 1, 2025, a plan sponsor may rely on a good faith, reasonable interpretation of the new rules added by the SECURE 2.0 Act.

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