IRS Clarifies Student Loan Payment Matching Contributions for Employers

Understanding the SECURE 2.0 Act  

In plan years beginning after December 31, 2023, the SECURE 2.0 Act of 2022 permits employers with 401(k), 403(b), governmental 457(b), or SIMPLE IRA plans to provide matching contributions based on qualified student loan payments (QSLPs), rather than based only on an employee’s salary deferral contributions to a retirement plan. 

IRS’ Interim Guidance for Employer Matching Contributions 

On August 19th, the Internal Revenue Service issued interim guidance in Notice 2024-63 (the Notice). This notice addresses key questions about eligibility, contribution limits, and administration for employers offering QSLP matching contributions.  

What You Need to Know About Notice 2024-63 

The Notice covers issues that may arise for 401(k), 403(b), governmental 457(b), or SIMPLE IRA plans administering QSLP matching contributions. It states that plan sponsors may rely on the Notice until the IRS issues future proposed regulations related to matching contributions on QSLPs. 

Guidance Provided Under the Notice 

The Notice provides the following guidance: 

• For a QSLP to be treated as incurred by an employee, the employee making the payment on the QSLP must have a legal obligation to make the payments under the terms of the loan. 

• An employee’s maximum QSLP for a plan year depends on what type of retirement plan the employer sponsors. 

• For 401(k) and 403(b) plans, an employee’s qualified education loan payments can be QSLPs only to the extent such payments in the aggregate for a plan year do not exceed the annual salary deferral limit ($23,000 for 2024), less the employee’s actual elective salary deferrals made to the plan for the plan year, if any. 

• For governmental 457(b) plans, for purposes of calculating the maximum QSLPs for an employee for a plan year ($23,000 for 2024) under the plan, the amount deducted from the maximum QSLP is the lesser of 1) the amount of the employee’s actual salary deferrals to the plan for the plan year or 2) the employee’s compensation under Internal Revenue Code section 415(c)(3).  

• A plan may not include provisions limiting QSLP matching contributions to only specific types of qualified education loans, such as qualified education loans for an employee’s education, a specified degree program, or attendance at a specified school. 

• A plan with a QSLP matching contribution feature may not include provisions that exclude employees from receiving QSLP matching contributions even though those employees are eligible to receive elective deferral matching contributions under the plan.  

• A plan with a QSLP matching contribution feature may not include provisions that exclude employees from receiving elective deferral matching contributions even though those employees are eligible to receive QSLP matching contributions under the plan. 

• A QSLP matching contribution contributed for a plan year may not be based on a qualified education loan payment made during a different plan year. 

• For an employee’s qualified education loan payment to be a QSLP, the employee must certify that the payment satisfies the requirements to be a QSLP. 

• To satisfy the certification requirement regarding a qualified education loan payment, the following information must be received by a plan sponsor from the employee: (1) the amount of the loan payment; (2) the date of the loan payment; (3) that the employee made the payment; (4) that the loan 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; and (5) that the employee incurred the loan.  Please note that items 1 through 3 must be provided annually to the plan sponsor. 

• A plan does not have to require that an employee submit verification in support of an employee’s certification that a qualified education loan payment is a QSLP. 

• A plan may establish a single QSLP matching contribution claim deadline for a plan year or multiple deadlines for QSLP matching contribution claim submissions, provided that each QSLP matching contribution claim deadline is reasonable. 

• A plan is not required to provide for contributions of QSLP matching contributions on a rolling basis as employees submit QSLP claims and further, a plan may provide for QSLP matching contributions to be contributed at a different frequency than salary deferral matching contributions, but not less frequently than annually. 

• In the event an employee’s certification of a QSLP is determined to be incorrect, a matching contribution based on that certification does not have to be corrected by the plan sponsor. 

When Does Notice 2024-63 Go into Effect?  

The Notice applies for plan years beginning after December 31, 2024. It further provides that for plan years beginning before January 1, 2025, a plan sponsor may rely on a good faith, reasonable interpretation of the SECURE 2.0 Act.  

Is QSLP Matching Right for Your Organization? 

While the QSLP matching contribution provisions of the SECURE 2.0 Act do not seem destined to be broadly adopted by plan sponsors, the guidance under the Notice may lead to some plan sponsors that were reluctant to adopt QSLP matching provisions to adopt such provisions now that there is some guidance from IRS. Contact our team today if you have questions about incorporating a student loan matching contribution feature into your plan.