Abbott Laboratories was the first company to offer such a program in 2018, after it received a private-letter ruling from the IRS allowing the company to do so. Under Abbott's Freedom 2 Save program, employees directing 2% of their annual salary toward student loan payments receive a 401(k) contribution worth 5% of their salary — the equivalent of the company match.
The IRS guidance addresses several aspects of implementing such a program through a question-and-answer format.
One question asks if a retirement plan can match contributions “to only certain qualified education loans,” such as those used for a certain degree or certain school. The IRS answered that no, plan sponsors are not allowed to do so, as covering "only a subset of employees" would violate the requirement that "matches be available to all employees who are eligible."
Generally, the IRS defines a qualified student loan payment as one made by an employee to pay for "higher education expenses of the employee, the employee’s spouse, or the employee’s dependent."
In addition, the IRS clarifies what type of information is needed for a plan to certify that a student loan payment qualifies for a matching contribution.
The guidance states that a plan and any third-party service provider acting on behalf of the plan must receive the following information:
- “The amount of the loan payment.”
- “The date of the loan payment.”
- “That the payment was made by the employee.”
- “That the loan being repaid 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.”
- “That the loan was incurred by the employee.”
The IRS guidance also says that plans “may establish any reasonable administrative procedures” to implement student loan matching, clarifying that plans can establish a single “match claim deadline” or multiple deadlines in one plan year, “provided that each…deadline is reasonable.”
The guidance applies to plan years beginning in 2025, though for plan years beginning before then, “a plan sponsor may rely on a good faith, reasonable interpretation” of SECURE 2.0, the IRS states.
The IRS asks for public comment on the interim guidance and said it plans to issue regulations on the matter.
The agency specifically asks whether additional guidance is needed regarding verification of student loan payments and whether additional examples of “reasonable procedures” for establishing student loan matching are needed, among other things.
In an Aug. 19 statement, ERIC's Banducci applauded the guidance and said the trade association plans to provide comments to the IRS "in the coming weeks."
