401(k) matching for student loan payments finally arrives

In this economic environment, employers are doing almost anything to attract and retain a quality workforce. Improving the suite of employee benefit offerings, sometimes without incurring major new expenditures, is top of mind for many.

Enter SECURE 2.0, which includes a long-awaited 401(k) feature that has sparked employer interest for years.

What is it?

The new legislation lets employers treat an employee’s payments toward student loan debt as if they were 401(k) contributions.

Employers are permitted to make “matching contributions” into the employee’s plan account even though the employee didn’t contribute anything to the plan. This is a discretionary feature and isn’t required.

Why add this feature to your plan?

This could be a win-win for employees and employers. Employees are incentivized to pay down a potentially large student loan debt burden while simultaneously saving for retirement. Employees wouldn’t have to choose between paying down student loans and making 401(k) deferrals to receive the match.

For employers, although it might mean making a matching contribution when it otherwise wouldn’t (for example, if an employee chose to make loan payments rather than elective deferrals), it would almost certainly be a unique benefit offering, and the matching contributions are deductible in the same manner as a traditional match.

Only ‘qualified student loan payments’ count