IRS Issues Interim Guidance on SECURE 2.0 Act’s Student Loan Matching Contributions

This week, the Internal Revenue Service (“IRS”) issued interim guidance on Section 110 of the SECURE 2.0 Act of 2022 (the “Act”) for sponsors of 401(k) and similar retirement plans. The Act, which was signed in December 2022, was aimed at improving retirement savings opportunities and expanding retirement savings coverage. The changes under the Act are taking effect on a staggered timeline that will be complete in 2027.

Section 110 of the Act, which applies to contributions made for plan years beginning after December 31, 2023, allows employers to make matching contributions under certain retirement plans, including 401(K) plans, based on employees’ qualified student loan payments, rather than employee contributions to a retirement plan. This section was intended to assist more employees (who may be allocating their money to repay student loans, rather than to a 401(k) – and thus missing out on employer matching contributions) with saving for retirement. Through this section, these employees may now receive previously unavailable matching contributions from their employers.

The IRS’s guidance, published here, applies for plan years beginning after December 31, 2024. Using a question and answer format, the guidance addresses several questions, including:

• What qualifies as a “qualified student loan payment;”
• What student loan matching contribution procedures a plan may adopt to implement a qualified student loan payment match feature;
• What is required for an employee certification that student loan matching contribution requirements have been met.

The IRS has also said that it plans to issue proposed regulations that will provide further guidance on Section 110. In the meantime, plan sponsors can rely on this interim guidance. The IRS welcomes public comments on this notice.