Matching Student Loan Contributions to Retirement Plans

Employers with a 401(k) plan or SIMPLE IRA plan can provide matching contributions based on student loan payments, rather than based only on elective contributions in plan years beginning after December 31, 2023. The IRS released guidance on these employer matching contributions in Q&A form. They explain what constitutes a qualified education loan payment (QSLP) for purposes of matching contributions; the employee must certify this amount. The plan does not have to offer this matching QSLP option; if it wants to, then the plan must state that it does. The plan can make QSLP matches at a different frequency than matching contributions, provided that the frequency is not less than annually. The QSLP is limited by the salary reduction amount, but is not treated as a salary reduction (i.e., employees are taxable on their funds used to make loan repayments as compared with tax-free treatment of salary reduction contributions to basic 401(k)s). #IdeaoftheDay