One of the provisions of Secure 2.0 allows Plan Sponsors to match Qualified Student Loan Payments (QSLPs). Previously we looked at the potential benefits of utilizing this provision. But there is an old saying “nothing in life is free.” Keeping in mind that utilizing this provision is completely optional on the part of the Plan Sponsor, the IRS has also added some obligations in order to utilize it.

To match student loan payments the loans must first be “Qualified.” On the surface this process is somewhat simple – and the much of the administrative burden falls on the employee who wishes to have their payments matched. To match the SLPs the following items must certified:

1. The loan must be attributable to qualified higher education expenses for the employee, their spouse, or any of their dependents.
2. They cannot simply be a guarantor. The employee must be the person incurring the expense.
3. The loan is being repaid by the employee.
4. The amount of the loan payment(s).
5. The date(s) of the loan payment(s).

The employee must make an affirmative certification of the first two items on an annual basis, then provide for verification regarding the final three items. There are several methods to verify the payments including registration, passive reporting and even payroll deduction. Without getting caught up in the details, the important part to remember is that there are specific guidelines that must be followed to offer the benefit.

Once the qualified payments have been certified, the employer must still establish reasonable match procedures, which will probably vary slightly from standard payroll deferral, and provision must be made to ensure the matching contributions are tested to assure non-discrimination. Thus, there will be an administrative burden on the Plan Sponsor, not just the employee.

Bottom line: matching Qualified Student Loan Payments requires professional guidance and documentation and should not be entered into without a commensurate benefit to the employer and employee.

Please contact your ABG Client Relationship Manager if you are interested in exploring this provision further.