Treasury, IRS Guidance Provides Additional Clarity on SECURE 2.0 Student Loan Matching Contributions Provisions
September 24, 2024
The U.S. Department of the Treasury and Internal Revenue Service published Notice 2024-63, providing question-and-answer guidance on the provisions of SECURE 2.0 allowing employers to make matching contributions on student loan payments by employees.
The Notice offers employers flexibility in terms of when they are permitted to make student loan matching contributions and allows employers to adopt claims procedures that will prevent disruptions to routine plan operations. Additionally, the Notice clarifies that if an employer participating in a multiple employer plan adds a student loan matching feature, every other employer participating in the plan is not required to adopt such a feature.
SECURE 2.0 permits employers to make matching contributions under 401(k), 403(b), and governmental 457(b) plans or a SIMPLE IRA with respect to qualified student loan payments. These are generally defined as a payment made by an employee in repayment of indebtedness incurred by the employee solely to pay qualified higher education expenses. For almost all purposes, a qualified student loan payment is not treated as an elective deferral contribution to the plan, but any matching contribution made with respect to such payment is treated as a matching contribution. Notice 2024-63 also helps resolve a number of important questions about the SECURE 2.0 provisions. Most notably:
- Effective Date/Good Faith Relief: The student loan provision of SECURE 2.0 is effective for contributions made for plan years beginning after Dec. 31, 2023. Notice 2024-63 states that its interpretations will apply to plan years beginning after Dec. 31, 2024. For plan years beginning before Jan. 1, 2025, a plan sponsor may rely on a good faith, reasonable interpretation of the law, which includes Notice 2024-63.
- Qualified Education Loans: The notice explains that for a qualified education loan to be treated as incurred by an employee, the employee who makes the loan payment must have a legal obligation to do so under the terms of the loan.
- Uniformity Requirements: The guidance confirms that all employees eligible to receive elective deferral matches under a plan with a QSLP match feature must be eligible to receive them. Additionally, QSLP matches must be made at the same rate and under the same vesting schedule as the plan’s regular match. The same conditions on eligibility for a QSLP match must apply to a regular match (e.g., "last day" requirement).
- Employee Certification Procedures: Notice 2024-63 provides very detailed guidance on how a plan may obtain the necessary employee certifications regarding QSLPs. While affirmative employee self-certifications are permitted for all necessary data elements, the guidance details alternatives to affirmative certifications that may be used for certain data elements.
- Claims Deadline: SECURE 2.0 directs Treasury to prescribe regulations that permit employers to establish reasonable procedures to claim matching contributions for qualified student loan payments, including an annual deadline (not earlier than three months after the close of each plan year) by which a claim must be made. The Notice indicates that a plan may establish a QSLP match claim deadline that is earlier than three months after the close of each plan year.
- Incorrect Certifications: The Notice states that even if an employee’s certification of a QSLP is determined to be incorrect, a match based on that certification does not need to be corrected. However, a QSLP match is permitted to be corrected to the extent an employee’s certification of a QSLP is determined to be incorrect, provided that all QSLP matches made under similar circumstances are corrected.
- Comments Requested, Proposed Regulations Forthcoming: Treasury and IRS anticipate issuing proposed regulations on QSLP matching contributions and are requesting comments on the Notice and certain outstanding issues. Comments must be submitted by Oct. 18, 2024.
For more information on SECURE 2.0 or other retirement policy issues, contact Erica McFarquhar, Deputy General Counsel, or Irica Solomon, Head of Government Affairs.