October 14, 2024
New Legislation Allows Employers to Match Employee’s Student Loan Repayments.
Employers can match employees' payments toward their student loans when SECURE (Setting Every Community Up for Retirement Enhancement Act) 2.0 goes into effect in 2025.
President Joe Biden signed the new legislation into law on Dec. 29, 2022, as part of the CAA (Consolidated Appropriations Act) of 2023.
SECURE 2.0 is designed to improve retirement savings options in the United States, including 401(k) plans and 403(b) plans. It builds on the previous SECURE Act of 2019.
Abbott Laboratories pioneered helping employees with student loan debt by petitioning the IRS (Internal Revenue Service) to let it offer the benefit. This was approved in 2018, and nearly 1,000 employees had signed up within a year.
How SECURE 2.0 Benefits Borrowers
Surveys found that 21% of student loan holders did not know how they would afford to resume making their federal student loan repayments when the hold was lifted in October 2023. Student loan borrowers employed by a company offering these new plans can have their employer match their payments toward their loans. This is similar to how it is done now with 401(k) matching for retirement. This new law would allow borrowers to pay towards their student loans while their employers still opt to put a percentage into the employee’s 401(k). This is even if the employee puts no income into their retirement account. However, even though employers can help with current student loan amounts, it is still unclear if private student loans will qualify under SECURE 2.0, and companies currently have no sample plans to guide them through this new plan. Some rules must be followed to qualify for these new benefits, and borrowers must follow them to access them.- You must have an eligible retirement account, either a 401(k), 403(b), 457(b), or Simple Plan
- You must be making payments on a qualifying education loan, which is used to pay for educational expenses for you, your spouse, or your dependent
- You need to “self-certify” that you made payments
- Your contributions cannot exceed annual retirement contribution limits set by the IRS.
