Table of Contents

401(k) Match for Student Loan Repayments: What You Need to Know

By

澳洲幸运5官方开奖结果体彩网:Carrie Pallardy

Updated July 18, 2024

Reviewed by

Samantha Silberstein

Fact checked by

Ryan Eichler

Part of the Series

How Do 401(K) Loans Work?

The Basics

Pros and Cons

Buying a House

Student Loans

At the end of 2022, the student loan debt load in the United States stood at approximately $1.76 trillion. By the end of the first quarter of 2023, it was $1.77 trillion. The nation's student debt continues to climb, totaling 37% of U.S. consumers' total outstanding debt—down a few percentage points from 2020's 40.1% and 2021's 39.1%, but still more than one-third of all consumer debt.

People across all age groups struggle to balance student debt and retirement savings. A study conducted by CNBC and Acorns found that 81% of people with student loans have needed to delay important life goals, such as buying a home or retirement. But as of 2023, you have some help building your retirement funds—your employer can make a matching contribution to your 401(k) while you m🌳ake your payments.

Key Takeaways

The IRS ruled that employers could make 401(k) contributions for employees who are paying off student debt and unable to make their own direct 401(k) contributions.
The SECURE 2.0 Act of 2022 solidified this employee benefit, allowing employers to match retirement contributions for workers paying off their student loans.
Employers can help employees save for retirement and pay off student loans.

U🦄nderstanding Employee Student Loan Repayments with 401(k) Contributions

Secure Act 2.0

The Securing a Strong Retirement Act (SECURE 2.0 Act) builds on the work of the Setting Every Cಌommunity Up for Retirement Enhancement (SECURE) Act that became law in December 2019. The sweeping law included a provision that allowed employers to adopt programs that match 401(k) contributions with employee student loan repayment. It specified that 澳洲幸运5官方开奖结果体彩网:vesting schedules for matching contributions for employee student loan payments be the same as all other matching contributions.

The SECURE 2.0 law eased employer compliance concerns. Without this law, employers had to work with the IRS on an individual basis to establish this kind of employer proওgram for 401(k) matching fꦆor student loan payments.

Fast Fact

The SECURE 2.0 legislation had strong bipartisan support. It was signed into law by President Biden on Dec. 29, 2022, as part of the Consolidated Appropriations Act (CAA) of 2023.

The ruling allows employers to contribute to eligible employees’ 401(k)s. The employees must make a payment from their eligible earnings toward their student loans during the same pay period as the contribution.

What It Means for Employers

Employer 401(k) matching for student loan repayment offers a tax advantage over other approaches to employer support for loan repayment. If an employer were to make student loan payments for the employee, the payment would be taxable. By contributing to a tax-advantaged retirement plan, employers avoid taxes on the contribution.

Employers can also offer student loan repayment programs as a recruiting and retention tool.

Do All Employers Offer 401(K) Matching for Student Loan Repayments?

As of the passing of SECURE 2.0, the Internal Revenue Service (IRS) allows all employers to make matching contributions to eligible employees' 401(k)s.

Should You Invest in Your 401(K) If You Have Student Loans?

Many Americans put off saving for retirement because of their student loans, but retirement planning is best started early. If you start saving for retirement early—even if it's just your employer matching contribution—you have more time to take advantage of 澳洲幸运5官方开奖结果体彩网:compounding.

How Did the Rules on 401(K) Matching and Student Loan Repayment Change?

The Securing a Strong Retirement Act (SECURE 2.0) authorized linking 401(k) matching contributions to employee student loan repayment. It was part of the Consolidated Appropriations Act (CAA) of 2023. The law gives all employers𒐪 the option of offerring this benefit to their employees.

The Bottom Line

ཧBefore the SECURE 2.0 Act, employers wanting to pursue 401(k) matching for employees repaying their student loans needed to work with the IRS to determine if they could launch that program. With the passing of the SECURE 2.0 Act, all employers can offer this benefit.

Article Sources

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U.S. Office of Personnel Management. “.”

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