Secure Act 2.0 Student Loans Match: How to Implement It

• You can strengthen your benefits package and attract top talent by offering a retirement match on employees’ student loan payments, aligning your organization with modern financial wellness trends.

• You’ll need to establish a clear certification process, follow IRS guidelines on contribution limits, and meet nondiscrimination testing requirements to keep your program compliant.

• Make sure employees understand the benefit, provide straightforward instructions, and review the program regularly to adapt to evolving workforce needs and regulatory updates.

With the the SECURE Act 2.0, employers now have a great opportunity to enhance their employees’ financial well-being by helping them manage their student loan debt. This new provision, known as the Qualified Student Loan Payment (QSLP) match, enables employers to contribute to retirement accounts in a manner that matches the employees’ student loan payments, similar to traditional 401(k) contributions.

If you’re an HR manager or a business owner, adopting this matching program can give your company a competitive advantage in attracting and retaining top talent, especially at a time when financial benefits are increasingly valued.

This guide will help you understand how to implement this benefit smoothly within your organization, providing practical tips on eligibility and implementation to ensure a seamless integration.

1. Determine Employee Eligibility: Begin by identifying which of your employees are eligible for the program. Eligibility requires that employees are making qualified student loan payments. Check the type of loans and their repayment schedules to ensure they comply with the program’s requirements. You can work closely with your HR and payroll departments to streamline the verification process.

2. Consult with Your 401(k) Provider: The success of this program depends on the ability to treat student loan payments as retirement contributions for matching purposes. Reach out to your 401(k) provider to ensure their platform can support the QSLP match, and collaborate with them to implement any required technical adjustments.

3. Set Matching Contribution Parameters: Decide on the structure of your match. While the SECURE Act allows you to mirror the 401(k) match for student loan payments, you’ll need to determine the specific match rate and annual caps based on your organization’s benefits budget. Keep in mind any IRS limits for retirement contributions to stay compliant.

4. Establish Payroll and Tracking Systems: Work with your payroll provider to set up tracking systems that recognize student loan payments as matchable contributions. Ensure that payroll data syncs correctly with your retirement benefits provider to avoid any reporting errors.

5. Communicate the Benefit to Employees: Once the program is ready, inform eligible employees about this new benefit. Provide clear instructions on how they can participate, including any documentation or forms they need to submit. Consider hosting an informational session to explain how the program works and answer any questions.

6. Monitor and Adjust: After implementing the program, regularly review its impact and gather feedback from employees. Monitor participation rates and assess any administrative issues. This will help you make any necessary adjustments to improve efficiency and employee satisfaction over time.

Employee Certification Process for QSLP-Eligible Payments

To qualify for the QSLP match, employees need to certify their student loan payments by providing specific information. This includes the payment amount, payment date, confirmation that the payment was made, proof that the loan is a “qualified education loan,” and evidence of the employee’s responsibility for the loan.

The certification process can be handled through one of three verification methods, depending on the plan’s structure:

• Active Certification: Employees actively provide their loan details using an online submission form.

• Passive Certification: The plan collects payment information directly from the lender and then asks the employee to confirm its accuracy.

• Independent Verification: Employers independently verify payments, such as through payroll deductions.

Plans may choose to use one or a combination of these methods and may allow alternative documentation options, such as loan statements. Employers aren’t obligated to retroactively correct past matches due to certification errors, but they must address any operational issues promptly to maintain compliance with program requirements.

Business Impact of Implementing a QSLP Match

Offering a QSLP match program can create meaningful outcomes for your organization. Here’s a quick look at the impact you can expect:

1. Higher Retention and Lower Turnover: Many companies that offer student loan assistance find they have lower turnover rates. Employees often feel more valued and supported in their financial endeavors, which can be especially meaningful in competitive sectors. This feeling of support can translate into considerable savings in recruitment and training costs.

2. Increased Job Satisfaction and Productivity: When employees have financial stress reduced, they tend to be more focused and engaged at work. Studies show that employees who feel financially supported are more productive, potentially boosting overall team performance.

3. Competitive Positioning: A QSLP match program is still a relatively rare benefit, making it a distinctive offering in your industry. This unique benefit can help attract highly skilled candidates, particularly younger professionals burdened by student debt, setting you apart from competitors.

4. Enhanced Employee Financial Wellness: By offering a benefit that addresses both student debt and retirement savings, you’re creating a financially healthier workforce. This can indirectly contribute to better workplace morale and fewer stress-related issues, supporting a positive company culture.

These tangible outcomes make the QSLP match more than just an added benefit—it’s a strategic investment in your workforce and organizational health.

To implement the SECURE Act 2.0’s QSLP match, employers must adhere to specific IRS and ERISA requirements.

Here are the key compliance considerations, including the latest proposed guidance:

1. Eligibility and Certification: Employers need to offer the QSLP match to all employees who can defer part of their salary, not just those who do. Employees might need to show details like how much they paid, when, and proof that their loans qualify. You can choose to check this information yourself or let employees self-certify, either each time they pay or once a year.

2. Contribution Limits and Plan Types: The QSLP match is subject to the retirement plan’s deferral limits. For example, 401(k) and 403(b) plans use the Section 402(g) limit, reduced by other employee deferrals. SIMPLE IRAs and 457(b) plans follow similar but plan-specific limits.

3. Loan Qualification and Eligibility Ambiguities: Only loans used for qualified higher education expenses are eligible, covering loans for the employee, their spouse, or dependents. But, it’s not yet clear if loans for part-time students or high schoolers taking college courses are eligible. Make sure to clearly communicate which loans qualify to your employees.

4. Frequency of Matching Contributions: Unlike standard elective deferral matches, the proposed guidance allows QSLP matches to be contributed at a different frequency—at least annually, with options for quarterly or yearly matching. Although an annual match is currently anticipated, clarification may emerge on whether paycheck-by-paycheck matching will be feasible.

5. Testing Requirements: Employers have two options for ADP testing—either a single test or separate tests for employees receiving QSLP matches. Separate testing methods offer flexibility, especially if non-highly compensated employees have higher deferral rates.

6. Reasonable Procedures and Deadlines: Employers can set rules for when QSLP claims need to be made, such as a March 31 deadline for the previous year, to keep things running smoothly without messing up payroll or taxes. Any deadlines should be within 2.5 months after the plan year ends to avoid extra taxes, unless you have a specific arrangement that allows for later corrections.

7. Dependent and Spousal Payments: Employees can receive matches for payments made on behalf of a spouse or dependent if they have a legal repayment obligation (e.g., as a co-signer). But it remains ambiguous if dependents are still eligible when they were dependents at the time of loan origination but not at the time of repayment. Employers may need to monitor for further clarification on this point.

8. Compliance with Other Plan Types: The QSLP match feature doesn’t affect plan eligibility for 403(b), governmental 457(b), or SIMPLE IRA plans, allowing these plans to include a student loan match without losing their qualified status.

9. Effective Date and Future Guidance: The rules for QSLP matches start with plan years after December 31, 2024. Keep up with the latest regulations, expected by late 2024 or early 2025, to make sure you stay compliant.

1. Clear Communication: Educate eligible employees on the QSLP match rules, including certification requirements, deadlines, and how to submit claims. Transparent communication will help employees understand the benefit and encourage participation.

2. Streamline Certification Processes: Set up a user-friendly certification process, such as allowing employees to certify their loan payments once annually. Simplifying certification minimizes administrative burden and maintains program integrity.

3. Set Reasonable Deadlines for Claims: Establish reasonable deadlines for employees to claim their QSLP match, such as March 31 for prior year claims. This allows employees sufficient time to gather necessary documentation without delaying payroll or tax reporting.

4. Monitor Regulatory Updates: Keep track of IRS updates and proposed regulations regarding QSLP matching. Working with legal and benefits advisors ensures ongoing compliance as guidance evolves.

5. Assess Workforce Needs Regularly: Periodically review workforce demographics to ensure the QSLP match program continues to meet employee needs, especially as student loan trends and financial wellness priorities shift.

Offering a student loan match under the SECURE Act 2.0 can elevate your benefits package, helping you support employees’ financial well-being while staying competitive in today’s job market.

Implementing this benefit may seem challenging, but by following clear steps and staying compliant, you’ll position your organization as an industry leader in financial wellness.

Although we don’t offer direct services for employer retirement benefits, this guide is designed to assist you in understanding the process and making well-informed decisions as the SECURE Act 2.0 provisions are implemented.

Related reading:

• How Do You Pay a Student Loan When Self Employed?

• Student Loan Repayment Options – What You Should Know Before Choosing

• What to Know About Paying Off Your Student Loans