he SECURE 2.0 Act opened the door for employers to match employees’ student loan payments with 401(k) contributions starting in 2024. This innovative benefit helps workers burdened by student debt save for retirement – but it also introduces new complexity for HR, payroll, and plan administrators. A few pioneering employers (from Abbott’s 2018 pilot to recent programs at Chipotle, Verizon, Disney, News Corp, and others) have begun implementing student loan 401(k) matches (worldatwork.org). However, most plan sponsors are proceeding cautiously. In fact, a recent PSCA survey found only four companies had rolled out the feature for 2024, while the vast majority are holding off due to compliance concerns (asppa-net.org).
Early adopters have learned valuable lessons about what can go wrong (and how to avoid it). Below, we’ll explore common compliance and documentation pitfalls they’ve encountered – and provide guidance grounded in IRS regulations and HR best practices. If you’re considering a student loan match program under SECURE 2.0, these insights will help you set it up compliantly and efficiently.
One of the first pitfalls is failing to align your plan documents and eligibility rules with the new student loan match provision. SECURE 2.0’s rules require that the student loan matching benefit be effectively available to all employees eligible for the regular 401(k) match (littler.com). In other words, you generally cannot offer the student loan match to a subset of employees or impose extra conditions that don’t apply to your standard match program. For example, if your plan doesn’t require employees to be employed on the last day of the year to get a regular match, you cannot suddenly require that for the student loan match. Early adopters learned to carefully amend their plan documents to extend this benefit uniformly, avoiding any inadvertent eligibility restrictions.
It’s critical to formally amend your 401(k) plan (and Summary Plan Description) to incorporate the Qualified Student Loan Payment (QSLP) matching feature. This includes defining qualified student loan payments and stating the match formula. The match formula should mirror your regular matching contribution formula or safe harbor formula, applying to loan payments as if they were deferrals. (Note: The total loan payments that can be matched for a participant cannot exceed the maximum allowable 401(k) deferral for the year minus any actual deferrals (segalco.com). This prevents “double dipping” beyond IRS limits.) Several employers delayed implementation until they saw clear examples of plan language – Abbott Laboratories even published a “Freedom 2 Save” program blueprint after SECURE 2.0 passed, to guide others on plan design and compliance (sofi.com).
Safe harbor plans can incorporate a student loan match as well. In Abbott’s case, their 5% student loan 401(k) contribution was treated as a safe harbor nonelective contribution, and SECURE 2.0 now makes similar designs broadly available. If you have a safe harbor match plan, work with counsel to ensure the student loan match feature meets safe harbor requirements (for example, by giving the same fixed match on loan payments as you would on deferrals). The IRS guidance indicates QSLP matches are treated just like regular matching contributions for testing and safe harbor purpose, so a compliant plan design will integrate the two seamlessly.
Key takeaway: Update your plan documents and employee communications upfront. Define the benefit clearly, apply it consistently to all eligible employees, and don’t add new hurdles for employees to get the match. This documentation step is crucial to avoid an operational failure down the road.
Another major challenge for early adopters has been documenting that an employee’s student loan payment actually occurred and qualifies for the match. Unlike a regular 401(k) deferral (which the employer can see and verify in the payroll system), student loan payments happen outside of the plan, so the onus is on the employee (and employer) to certify those payments were made. The IRS’s interim guidance (Notice 2024-63) spells out five items of information that the plan must collect and certify for each loan payment in order to treat it as a “Qualified Student Loan Payment” eligible for matching:
Payment Amount: How much the employee paid toward the student loan.
Payment Date: When the payment was made.
Employee as Payor: Confirmation that it was the employee who made the payment (not someone else).
Qualified Loan Status: Confirmation that the loan is a qualified education loan (e.g. for higher education expenses) for the employee, their spouse, or dependent.
Loan Incurrence: Confirmation that the loan was incurred by the employee (i.e. the debt is in the employee’s name).
The plan can rely on an employee’s certification of these facts in good faith. In fact, the IRS explicitly allows employers to rely on what the worker certifies, and even states that if a match is made based on incorrect information, the plan is not required to claw it back later as long as the certification was in good faith (and not an intentional operational error). That provides some relief – but you still need a robust process to gather and retain these certifications to ensure compliance.
Early adopter lesson: Make the certification process as simple and foolproof as possible for employees. The IRS guidance gives flexibility in how you gather the info, offering three models for handling QSLP certifications (aviben.com):
Affirmative Employee Certification – the employee actively certifies their loan payments (e.g. via an online form or attestation each pay period or each year). Items (4) and (5) – the loan’s qualified status and that it’s the employee’s debt – must be certified by the employee at least once (you could do this via a one-time loan registration). Items (1), (2), (3) – amount, date, and confirmation of payment by the employee – can be certified for each payment or periodically (such as an annual statement). This model is straightforward and places responsibility on the employee to report their payments. Many early programs started with an annual self-certification approach for simplicity. For example, one employer that implemented the feature for 2024 required employees to submit an annual form listing their total qualifying loan payments for the year, as a basis for the company’s match. The upside is ease of administration; a downside is the employer generally cannot independently verify payments in real-time.
Payroll Deduction Model – the employer (or a vendor) integrates the student loan payment into the payroll process. In this model, the employee registers their loan with the employer and authorizes a payroll deduction for their student loan each pay period. The company withholds that amount and sends it to the loan servicer on the employee’s behalf, then allocates the corresponding 401(k) match. This effectively automates verification: if the payroll deduction was made, the loan payment is verified (and items 1–3 are satisfied automatically by this process). The advantage is high accuracy and no extra paperwork – you know the payments happened because you facilitated them. It also makes the matching contribution feel seamless, showing up regularly just like a normal 401(k) match on a paystub or statement. The disadvantage is setup complexity: you need to coordinate with payroll to establish deductions and remittances to potentially multiple loan servicers. Early adopters working with student loan benefit providers often use this model – for instance, firms that partnered with solutions like SoFi or Candidly enable direct payroll integration so that verification is automatic.
Third-Party Payment Verification – the employer uses a third-party service or platform to confirm loan payments directly with the loan servicer or through documentation, rather than relying solely on employee self-reporting. In this model, the employee typically registers their loan account with a verification service (granting read-only access or uploading statements). The service then verifies each payment (e.g. checking with the loan servicer or using banking data) and provides the employer the necessary info (amount and date) for matching. The IRS calls this “passive certification” – the plan receives info from the lender, assumes the employee made the payment, and gives the employee a chance to correct any errors. If the employee doesn’t dispute the info in a given time frame, it’s treated as certified. Many cutting-edge employers went this route by bringing in fintech partners. For example, engineering firm Kimley-Horn uses a student loan verification system run by SoFi at Work to automatically validate employees’ loan payments, and then their recordkeeper (T. Rowe Price) delivers the matching contributions (planadviser.com). This hybrid approach takes the burden off employees to prove each payment – they just enroll and link their loan – but it requires vetting a reliable service provider and ensuring data flows smoothly.
No matter which model you choose, you should document the procedure in your plan policies. Decide whether you’ll collect certifications each pay period, monthly, or once per year (the IRS allows you to require certification per payment or to accept an annual summary certification). Also, consider requiring a one-time “loan registration” when an employee first signs up for the benefit – i.e. they provide the loan details, lender info, and attest that it’s a qualified education loan. This one-time step (much like uploading a document or filling a form) can satisfy items 4 and 5 up front, so that in subsequent periods the employee only needs to report the payment amounts/dates (items 1–3). Early adopters found this dramatically reduces repetitive paperwork. The plan would only need a new registration if the loan is refinanced or the employee wants to add a different loan later.
Best practices: Make it easy on employees and admins – for example, use online portals or mobile apps for certifications, set clear annual or quarterly deadlines for submissions, and communicate reminders. If budget allows, leverage a third-party platform to automate verification. One plan sponsor noted that “administration with vendors is the challenge”– so if you do use a vendor, involve your IT and payroll teams early to ensure smooth integration and data security reviews. Keep copies of all employee certifications and any supporting documentation on file; auditors or regulators may request proof that each matched payment was qualified. A well-documented verification process will keep your plan in the clear.
When and how to deposit the matching contributions for student loan payments turned out to be another tricky area for early adopters. Unlike a standard 401(k) match that might be deposited each pay period, a student loan match can operate on different schedules. The law and IRS guidance give employers flexibility to choose a reasonable approach. Here are some timing pitfalls and solutions:
Frequency of the match deposits: The IRS requires that QSLP matching contributions be made at least annually. You can contribute more frequently (e.g. after each payday, monthly, or quarterly), but you cannot wait longer than annually. Early adopters have used a range of approaches. Some are handling the student debt match like an annual “true-up” contribution – employees certify their total loan payments for the year, and the company makes a single matching contribution after year-end. For instance, News Corp built their program to work similar to a year-end true-up, where after the close of the year the company calculates the match based on the employee’s certified loan payments. This approach simplifies verification and ensures no one exceeds annual limits. However, if you choose an annual deposit, be careful not to impose additional employment conditions (as noted earlier). If your regular match is each pay period with immediate vesting, you shouldn’t make the student loan match contingent on still being employed at year-end – otherwise you’d run afoul of the consistency rule.
Submission deadlines for claims: If you are doing matches on a periodic but delayed basis (e.g. quarterly or annually), you’ll need to set a deadline for employees to submit their loan payment information for a given period. SECURE 2.0 explicitly allowed an annual submission deadline up to 3 months after the plan year end (for example, March 31 for a calendar-year plan) as a safe harbor example of “reasonable procedures.” The IRS’s interim guidance clarified that 3 months after year-end is not a hard requirement, just one reasonable example. You could set more frequent deadlines (say, employees must submit prior-quarter payments by the end of the following quarter) – multiple deadlines are fine as long as each is reasonable. The key is to give employees enough time to certify their payments without unduly delaying the employer contribution. Many employers found quarterly windows (or at least a grace period into the new year) balanced timeliness with flexibility. Pro tip: align the deadline with your plan’s excess contribution testing timeline. The IRS noted that if a claim deadline extends beyond the 2½ month window for correcting excess contributions, it could complicate your testing corrections. In practice, if you’re doing an annual true-up match, setting a deadline at or shortly after year-end (e.g. January 31) may be better than March 31 to avoid overlap with ADP/ACP testing corrections.
Real-time vs. retroactive contributions: Some early adopters opted to contribute the match each pay period (in real time) for employees using the benefit – especially those using the payroll deduction model. This mirrors the normal cadence of 401(k) matches, which can be good for participant morale (employees see the immediate reward in their retirement account). It also spreads out the cost. If you can verify payments quickly (through payroll or a vendor feed), this is ideal. Other employers chose to do quarterly or annual lump-sum matches. The lump-sum approach means participants might not see the match in their 401(k) until weeks or months after making the loan payments, which is something to communicate so they understand the process. One trade-off: annual lump sums don’t harness the benefits of dollar-cost averaging like ongoing contributions. Still, for small populations or in the first year, an annual approach can reduce administrative strain. Consider doing an annual match at first, then moving to a more frequent cycle once processes are ironed out.
Coordination with regular matches: If an employee contributes to the 401(k) and makes student loan payments in the same year, your plan needs a rule for how the match is allocated. The law basically treats student loan payments as if they were elective deferrals for match purposes. In operational terms, that means if your match formula is (for example) 50% of the first 6% of pay, the sum of the employee’s 401(k) contributions plus their student loan payments (up to 6% of pay) would be matched at 50%. Early adopters like Kimley-Horn modified their plan to give full flexibility: an employee can contribute 4% to the 401(k) or put that 4% of pay toward loans (or some combination), and either way they receive the full company match of 8% of pay. It’s important to avoid any “double counting” – an employee who contributed the max and also paid loans cannot receive a match on more than the max contribution percentage. Your recordkeeper or TPA can help set up rules to coordinate this. Some recordkeepers will treat student loan payments as a separate bucket of deferrals in their system. Others might require you to true-up manually at year-end. Document in your procedures how you will handle someone who does both kinds of contributions to ensure they get the correct total match.
Integration with payroll and recordkeeping systems is the behind-the-scenes heavy lifting in all of this. If you use a major recordkeeper, check if they have a built-in solution for student loan matches. Many providers rolled out new features in 2024 to accommodate SECURE 2.0. For example, Fidelity launched its “Student Debt Retirement” program and reported that companies like LVMH and Sephora are using it in 2024. These solutions often include portals for employees to register loans and automation to feed data into the 401(k) platform. If your recordkeeper doesn’t have a turn-key solution, you may need to work with a third-party service that connects to payroll (as Kimley-Horn did with SoFi (kimley-horn.com). Either way, involve your payroll provider or department early. You might need to create new payroll codes (for loan repayment amounts) or custom reports to send to the recordkeeper indicating “Jane Smith paid $X in student loans this quarter, please contribute $Y as match.” One early adopter advised that waiting on 401(k) administrators to get up to speed was a reason they held off initially– so push your vendors to give you a plan or timeline for supporting this feature.
Data accuracy is paramount. Before launching, test the end-to-end process with a few dummy cases: does an employee’s loan payment correctly trigger the intended match in the system? Are loan payment amounts capped at the proper limits? Ensure that any vested percentage logic applies to these contributions the same as normal match (by default, QSLP matches are just matching contributions, so they follow your plan’s vesting schedule). By double-checking these technical details, early adopters avoided situations like mis-posted contributions or mismatch in records.
Even though QSLP matching contributions are new, they slot into the existing regulatory framework for retirement plans. Here’s what early adopters learned about keeping the program fair and compliant:
Nondiscrimination testing (ADP/ACP): In traditional 401(k) plans, the Actual Deferral Percentage (ADP) test ensures that highly compensated employees (HCEs) aren’t contributing disproportionately more than non-HCEs, and the Actual Contribution Percentage (ACP) test does similar for matching contributions. The good news is that SECURE 2.0 allows student loan matches to be treated as regular matching contributions for testing purposes. All QSLP match contributions are included in the ACP test just like any other match your plan gives. They do not count as elective deferrals in the ADP test because the employees didn’t actually contribute those amounts to the 401(k), but there are special rules to prevent the ADP test from being skewed. Specifically, plan sponsors have a choice: you can either (a) include non-contributing participants who are receiving student loan matches in the ADP test as if they were just contributing 0% (essentially treat everyone the same), or (b) use a separate ADP test grouping for those receiving QSLP matches.
In plain English, option (b) lets you carve out employees who only got a student loan match (and did not defer themselves) and test that “group” separately from those who made elective deferrals. This flexibility can help plans that might otherwise fail testing. For example, if many of your non-highly paid employees can’t afford to defer but do use the student loan match, grouping them separately could prevent them from dragging down the main ADP test (since they count as zeros in the main test). Early adopters worked closely with their plan testing consultants to decide which approach yielded better results given their workforce makeup. In some cases, companies amended their plan document to formally elect one of these testing methods for 2024. Recommendation: Model the impact on your ADP/ACP tests with last year’s data before rolling out the program. If implementing mid-year, be conservative and monitor how HCE vs NHCE participation shakes out.
Safe harbor considerations: If your plan is safe harbor (exempt from ADP/ACP testing due to providing a minimum employer contribution), adding a student loan match feature should be done in a way that maintains your safe harbor status. The IRS has indicated that as long as the employer is making equivalent contributions on behalf of employees (whether via deferrals or student loan payments), it falls under the safe harbor umbrella. Just be sure your safe harbor notice (if applicable) is updated to explain the new match structure. For example, if you normally match 100% of the first 4% deferred, your notice might now state that qualified student loan repayments will be matched at the same rate as elective contributions. A few large employers with safe harbor plans (e.g. Abbott and Abbott-inspired programs) have demonstrated that this is feasible and attractive for compliance. As always, if you change your contribution formula or add this feature mid-year, consult legal counsel about providing any required notice or if it must start at a plan year begin.
Coverage and eligibility testing: Offering a student loan match could raise questions if, say, only a small subset of employees use it. However, since it’s an optional feature available to all eligible participants, it generally shouldn’t cause coverage testing issues on its own (those are based on eligibility to participate in the 401(k) and receiving any benefits, not which type of benefit). If anything, the feature can improve plan inclusivity by benefiting employees who otherwise might not get any employer retirement contributions. In the words of News Corp’s benefits head, the goal was to address inequities in retirement savings between those carrying student debt and those who aren’t. As long as you’ve extended the feature to all eligible employees, you are meeting coverage requirements – you’re not excluding anyone; some employees will simply opt not to utilize it if they have no loans. Document that intention clearly in your plan amendment or committee meeting minutes (i.e. “all 401(k) eligible employees can receive matching contributions on either elective deferrals or student loan payments”). Also remember, collectively bargained employees can be treated separately – if your 401(k) covers union and non-union groups, you can choose to offer the student loan match only to the non-union group without violating rules, thanks to disaggregated testing rules. Just ensure the union plan documents are separate or explicitly carved out.
Auditing and oversight: Treat these new matches with the same rigor as any plan contribution. That means adding them to your annual plan audit checklist. Early adopters have started tracking metrics like how many employees submitted loan match claims, total dollars matched, etc., to help with plan governance. Your auditor may ask to see the proof of payments and the calculation of the match amounts. Keep a clear paper trail (or digital trail) showing that for each participant, “Employee A certified $X of student loan payments in 2025, therefore got $Y employer match on date Z, consistent with the plan formula.” Consistency and documentation are your best defense if any compliance question arises.
Now that we’ve covered pitfalls and lessons learned, here’s a checklist of actionable steps to implement a student loan 401(k) matching program successfully:
Amend Your Plan Documents: Update your plan document to add the QSLP (qualified student loan payment) matching feature. Use clear language that mirrors your existing match formula and eligibility. Ensure anyone eligible for the normal match is eligible for the student loan match – no extra waiting periods or last-day rules unless they apply to all. Also update Summary Plan Descriptions and employee-facing materials accordingly.
Choose a Certification Method: Decide how you will collect and verify proof of student loan payments. Will you require employees to self-certify each pay period or provide an annual summary? Will you partner with a vendor for verification or route payments through payroll? The IRS allows models ranging from simple self-attestation to independent verification. Pick the model that best fits your company’s resources and culture. Document this procedure in an internal admin policy so that it’s applied consistently.
Set Match Timing and Deadlines: Determine the frequency of the matching contributions. If doing real-time per paycheck matches, coordinate with payroll to process them. If doing quarterly or annual contributions, establish reasonable submission deadlines for employees to turn in their payment info (e.g. within 30 days after quarter-end, or by February 28 for prior year payments). Communicate these deadlines clearly. Also, ensure your plan’s contribution deposit timing (e.g. “company contributions will be deposited once annually”) is reflected in the plan document or an amendment if needed.
Integrate Systems and Train Teams: Work closely with your recordkeeper, payroll provider, and any third-party platform to integrate data flows. You may need new payroll codes or reporting formats to relay student loan payment data. Test this process end-to-end with a small group. Train your payroll and HR teams on the new process so they know how to handle inquiries or edge cases. (For example, how to address an employee who switches from loan payments to deferrals mid-year, or vice versa.)
Address Nondiscrimination Testing Early: Instruct your plan testing consultant or TPA about the new feature. Decide if you will aggregate or separately test participants who receive student loan matches for ADP test purposes (the IRS interim rule gives you two methods). If you have a safe harbor plan, ensure the student loan match counts toward your safe harbor contribution and that notices are updated. Essentially, run “practice” tests to confirm the new contributions won’t inadvertently cause a failure – especially if your HCEs are more likely to take advantage of this benefit (in some companies, execs might have MBA loans, etc., which could skew usage).
Educate Employees (and Managers): Roll out the program with a clear explanation to employees of how it works and what they need to do to get the match. Provide examples: e.g., “If you pay $200/month on your student loans, that’s $2,400/year, and we’ll contribute $2,40050% = $1,200 into your 401(k).” Emphasize any actions required (such as registering their loan or submitting a form). It’s also wise to caution employees not to reduce their own 401(k) contributions unless necessary – the student loan match is meant for those who can’t afford to contribute, not to encourage those already contributing to stop. Some research has noted a potential pitfall if employees divert money from retirement to other uses because they rely solely on the employer match. Encourage employees to continue contributing when they can; the student loan match is a boost, not a substitute for their own savings in the long run.
Monitor and Adjust: After launch, keep an eye on participation rates and any hiccups. Are employees meeting the deadlines? Any confusion about the process? You may need to send reminders or provide additional guidance. Also review the outcomes in your annual plan review: did the program help more people get an employer contribution? How much was utilized? Gathering this data will help you fine-tune the program and also demonstrate its value. Early adopters have found that usage might start small, but even a handful of employees getting a match they otherwise would have missed can be a big win for engagement and retirement readiness.
By following these steps, you can avoid the most common pitfalls that tripped up others. The overarching theme from early adopters is to be deliberate and detail-oriented in implementation. This is a cross-functional project (touching HR, benefits, payroll, finance, and legal), so assemble a team to cover all bases. When done right, a student loan 401(k) matching program can be a compliant, efficient win-win – helping employees pay down debt and save for the future, all while keeping your retirement plan in good standing.
The first wave of student loan 401(k) matching programs has shown that while the benefit is highly attractive, the devil is in the details. Companies like Kimley-Horn, News Corp, and others proved it’s feasible – and have shared blueprints for success. By anticipating the compliance nuances (from proper documentation and employee certifications to timing and testing), you can implement a program that avoids costly mistakes or rework.
Remember, you don’t have to go it alone. Many plan providers and fintech firms now offer tools to handle the heavy lifting of verification, tracking, and administration. With solid planning and the right partners, even a lean HR team can roll out this cutting-edge benefit with confidence.
Ready to take the next step? This benefit can set you apart in recruitment and retention – if it’s done right. Don’t let compliance fears hold you back. Equip yourself with the knowledge and resources to launch a smooth, successful student loan match program.
Download Loan Certify’s White Paper to see how our solution can help you navigate the process from start to finish. Our experience with early adopters has informed a streamlined approach that takes the guesswork out of compliance. By learning from those who’ve gone before, you can avoid the pitfalls and lead your organization into a new era of financial wellness benefits.
Empower your employees to conquer debt and build retirement security – all while staying firmly within the lines of compliance. With careful implementation, student loan 401(k) matching can be a game-changer for your workforce and a hassle-free addition to your benefits lineup. Now that you know the common traps and how to sidestep them, you’re well on your way to offering this innovative, impactful benefit. Here’s to helping your employees pay for the past and save for the future – safely and compliantly!