A Guide to SECURE 2.0’s Student Loan Assistance Provisions

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Under the SECURE 2.0 Act of 2022 (“SECURE 2.0”), there is a new and innovative way for employers to contribute a matching contribution to a defined contribution plan based on the amount of an employee’s student loan repayments.


Is this too good to be true? NO.

The purpose of the provision is to help employees who may decide not to make elective contributions to their employer’s retirement plan due to student loan debt and, as a result, miss out on employer matching contributions.

Under SECURE 2.0, beginning in 2024, an employer can amend its defined contribution plan to provide for a student loan matching contribution on behalf of an employee who is making periodic student loan repayments to a third party.

What’s cool about this SECURE 2.0 provision?

The matching contribution amount is calculated as if the employee had elected to contribute the loan repayment amount to the plan by payroll deduction, even though the employee’s pay is not actually reduced by that amount, and the employee does not in fact make any elective contributions to the plan.

The student loan match provision applies to Internal Revenue Code (“IRC”) Sections 401(k), 403(b), 457(b) governmental plans, and SIMPLE-IRA plans. Student loan repayments considered for match purposes cannot exceed an amount equal to the annual maximum deferral limit ($22,500 for 401(k)/403(b)/457(b) and $15,500 for SIMPLEs), less the elective deferrals made by the employee.

In addition, the SECURE 2.0 provision requires that the eligibility, match rate, and vesting requirements applicable to the student loan match must be the same as the match requirements on regular elective deferrals.

For administrative purposes, the student loan match may be made less frequently than regular matching contributions, but the match must be made at least annually.

What does the employer need to do to implement this provision?

The employer is not required to request or obtain student loan documents, evidence of payment, or other documentation relating to the student loan match. However, the participants need to certify that the student loan repayments were made and certify the amount of each payment.

Non-safe harbor 401(k) plans must apply a nondiscrimination test to both elective deferrals (“ADP”) and employer match (“ACP”) contributions. SECURE 2.0 permits a plan to utilize a separate ADP test for participants who elect to take advantage of the student loan match provision. This is particularly reasonable from an administrative and testing standpoint because employees who take advantage of the student loan matching provision are either not contributing elective deferrals to the plan or are contributing at a lower rate. In addition, these employees are primarily non-highly compensated, so the ADP test could be negatively impacted if they were included in testing with the entire plan population. Note that there is no comparable provision for the ACP test because the student loan match made for non-highly compensated participants not otherwise participating in the plan would positively impact the test.

A plan’s ADP and ACP nondiscrimination testing are often completed a few months prior to the end of the plan year so that failures can be corrected by the applicable deadline. This generally means making corrections by providing refunds by 2-1/2 months after year-end to avoid an excise tax. However, the deadline for self-certification can be no earlier than three months after the end of the plan year. Therefore, testing typically done during the 2-1/2 months after year-end may have to be delayed pending completion of the self-certifications. Employers will need to assess whether this timing conflict could present an issue.

What are the next steps?

If your company is interested in implementing a student loan match, reach out to Emily Langdon at elangdon@fraserstryker.com. Emily will walk you through the process, as well as the related pros and cons of the SECURE 2.0’s student loan assistance provision.

This article has been prepared for general information purposes and (1) does not create or constitute an attorney-client relationship, (2) is not intended as a solicitation, (3) is not intended to convey or constitute legal advice, and (4) is not a substitute for obtaining legal advice from a qualified attorney. Always seek professional counsel prior to taking action.

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