As we discussed in a previous article (here), student loan debt is an increasing concern among today’s workforce. While the IRS recently issued a Private Letter Ruling (a letter issued for a specific employer) that allowed a plan to treat student loan repayments as salary deferrals for purposes of matching contributions, there are questions and concerns remaining for other companies wanting to implement this program.
In an effort to combat this problem, legislation has been introduced that would allow plans to utilize this type of program to help their employees pay off student loan debt. The Retirement Parity for Student Loans Act would allow student loan payments to count as salary deferrals for purposes of matching contributions, as well as provide for ways for plans to meet nondiscrimination testing concerns.
Under the bill, employers would have the option to offer the student loan repayment program to its employees – it would not be mandatory. However, if the program is offered, then it must be available to all employees who are eligible to participate in the retirement plan and the matching contribution made would have to be the same as that for salary deferral contributions.
Only student loan debt related to higher education expenses would be eligible under the program and evidence that payments have been made would need to be provided. Under the Act, the Treasury Department would issue regulations on how this evidence should be obtained by employers.
Finally, the bill would provide clarification that providing matching contributions on student loan payments would not violate the rules that deem a plan to satisfy the nondiscrimination rules that apply to 401(k) plans.
Nyhart will monitor the progress of proposed legislation and update you accordingly. In the meantime, please contact your account representative at Nyhart for more information or if you have any questions.