401(k) Plans Can Now Offer Matching Contributions on Student Loan Payments
If you are making student loan repayments, you should ask your employer if it will match those payments in the company’s retirement plan. The SECURE 2.0 Act allows for matching contributions on “qualified student loan payments” (or “QSLPs”) beginning with plan fiscal years starting after December 31, 2023. (This is January 1, 2024 for most plans.) Matches on QSLPs are optional; plans are not required to offer them.
IRS Guidance Clarifies Matching Contributions for Qualified Student Loan Payments (QSLPs)
SECURE 2.0 lacked detail about how these matching contributions would work, and that made many employers reluctant to implement this new option. On August 19, 2024, the IRS issued Notice 2024-63. The Notice answered several pending questions about the matching contribution feature and gave employers flexibility in establishing and administering the feature. This guidance should spur more employers to offer the QSLP match.
A QSLP match may be provided by a 401(k) plan, a 403(b) plan, a governmental 457(b) plan or a SIMPLE IRA.
Eligibility and Matching Conditions for QSLP
To be a QSLP, the payment must be a repayment of a loan incurred by the employee to pay for higher education expenses of the employee, his spouse, or his dependent. A loan is “incurred” if the employee has a legal obligation to repay it. If an employee cosigns a dependent’s loan, the employee must be making the payment in order for it to qualify as a QSLP. If the dependent is making the payment, the employee can’t have those payments matched.
The total amount of QSLPs made for a calendar year can’t exceed the annual deferral limit in effect for that year (for 401(k) 403(b) and 457(b) plans in 2024, $23,000, or $30,500 for age 50 or older) minus any elective deferrals made during that year.
How QSLP Matching Works
Example: Caroline, age 40, participates in her company’s 401(k) plan which matches on QSLPs. During 2024, she has $15,000 of qualified student loan payments. She may only make elective deferrals up to $8,000 ($23,000 – $15,000) during 2024.
Employees must certify that the loan payment satisfies the QSLP requirements and must certify the amount of the loan payment, the date of the loan payment, and that the payment was made by the employee. The certification rules are user-friendly but complicated. Employees can self-certify all of these requirements, but there are other ways to comply. Check with the plan administrator or HR to see what level of certification is required by your plan.
Eligibility and Matching Conditions for QSLP
The IRS Notice also says that the QSLP match must be available to all employees eligible to receive matches on elective deferrals. So, an employer can’t limit QSLP matches to loan payments for an employee’s own education, a particular degree program (such as a Bachelor of Arts) or attendance at a particular school. The reverse is also true: All employees eligible to receive matches on QSLPs must be eligible to receive matches on elective deferrals.
Finally, QSLP matching contributions must be made at the same rate, and under the same vesting schedule, as the plan’s regular matching contribution. If a plan imposes any eligibility condition on a QLSP match (such as requiring employees to be employed on the last day of the plan year to qualify), the same condition must apply to a regular match.
By Ian Berger, JD
IRA Analyst
Ed Slott and Company, LLC
FAQs
Can all retirement plans offer QSLP matching contributions?
Yes, QSLP matches are available in 401(k), 403(b), governmental 457(b) plans, and SIMPLE IRAs. However, offering these matches is optional for employers.
What is a Qualified Student Loan Payment (QSLP)?
A QSLP is a loan payment made by the employee for higher education expenses for themselves, their spouse, or a dependent. It must be for a loan that the employee is legally obligated to repay.
Are there limits on how much of my student loan payments can be matched?
Yes, the total amount of QSLP matches cannot exceed the annual deferral limit for the year, minus any elective deferrals the employee makes during that period.
What do I need to certify to receive a QSLP match?
Employees must certify the amount, date, and source of the payment to qualify for a QSLP match. Self-certification is typically allowed, but the plan may require additional documentation.
Can employers set conditions on who can receive QSLP matches?
No, employers cannot restrict QSLP matches based on the employee's school, degree, or field of study. All employees eligible for regular matches must also be eligible for QSLP matches.
Do QSLP matches follow the same vesting schedule as regular deferrals?
Yes, QSLP matching contributions must follow the same rate and vesting schedule as regular elective deferrals.
Christian Cordoba, founder of California Retirement Advisors, has been a member of Ed Slott's Master Elite IRA Advisor Group since 2007.