IRS Provides Guidance on SECURE 2.0 Act Matching Contributions for Qualified Student Loan Payments

August 28, 2024

On August 19, 2024, the IRS released Notice 2024-63, which provides interim guidance pursuant to the SECURE 2.0 Act for employers that want to provide matching contributions based on eligible student loan payments made by participating employees.

In brief, among many other changes to retirement plan rules, SECURE 2.0 permits employers to amend their 401(k), 403(b), 457(b), and SIMPLE IRA plans to make matching contributions with respect to qualified student loan payments (QSLPs) for plan years beginning after December 31, 2023.

The notice addresses various plan administration issues related to matching contributions and QSLPs, such as:

• What qualifies as a QSLP: Generally, a payment made by an employee – who must also be a loan signer or cosigner – during a plan year to repay qualified education loans used for the higher education expenses of the employee, their spouse, or their dependent.
• Dollar and timing limitations: The total amount to take into account for matching contributions may not exceed the lesser of 1) the annual deferral limit in effect for the year (e.g., $23,000 for 2024) or 2) the employee’s compensation. Furthermore, matching contributions must be based on qualified education loan payments made within the same plan year.
• Certification requirements: Plans can require separate certifications for each or allow for a single annual certification. Certifications must specify payment amounts, payment dates, proof of payment, that the loan is for qualified education expenses, and that the employee incurred the loan.
• Reasonable matching contribution procedures: Plans may establish reasonable administrative procedures to implement QSLP match features, including but not necessarily limited to having a single claim deadline for a plan year or multiple deadlines for claim submissions, provided that each deadline is reasonable under all relevant facts and circumstances. The guidance indicates that an annual deadline that is three months after the end of a plan year will be deemed reasonable.
• Special nondiscrimination testing relief: Plans may choose to apply separate Actual Deferral Percentage tests for employees who receive QSLP matches and those who do not receive QSLP matches. The guidance also provides several methods that plan sponsors can use to apply these tests.

While the notice applies for plan years beginning after December 31, 2024, employers can rely on it for plan years beginning in 2024 as an example of a good faith, reasonable interpretation of these changes made by the SECURE 2.0 Act.

Notice 2024-63