The SECURE 2.0 Act, passed by Congress, introduces new ways for employees to save for retirement by aligning student loan payments with retirement benefits.
For the first time, employees can use their student loan payments to qualify for employer 401(k) matching contributions. This means that even if you’re focused on paying off student loans, you can still build retirement savings without needing to contribute additional income.
Student Loan Matching: Enables employees who make student loan payments to qualify for employer matching contributions in their retirement plans.
Retirement Security Boost: Offers a path to build retirement savings while paying off student debt, a key concern for many employees with student loans.
Employer Flexibility: Allows companies to support employee financial wellness in new ways, helping them attract and retain talent.
Section 110 of the SECURE 2.0 Act provides a new opportunity for employees with student debt to grow their retirement savings. It allows employees who are making student loan payments—but may not be able to contribute to their retirement plan due to financial constraints—to still receive employer matching contributions.
Under Section 110, employers can now treat student loan payments as if they were elective contributions to a retirement plan. This means that when an employee makes a payment on a qualified student loan, the employer can make a matching contribution to the employee’s 401(k), 403(b), SIMPLE IRA, or similar plan. Governmental employers can also provide this benefit in a 457(b) plan or other eligible plans.
A “qualified student loan payment” is any debt incurred solely to pay for the employee’s own qualified higher education expenses. This opens the door for many employees burdened by student debt to start building retirement savings while paying down their loans.
For employers, Section 110 allows for separate nondiscrimination testing for employees who receive matching contributions on their student loan payments. This helps employers meet testing requirements while offering this unique benefit.
Section 110 takes effect for contributions made for plan years beginning after December 31, 2023. This new benefit is designed to help employees manage both their student loans and retirement savings more effectively, paving the way for a stronger financial future.
Many employees feel torn between paying down student loans and building retirement savings. With the SECURE 2.0 Act, your loan payments can work double duty. By making regular student loan payments, you can now receive retirement contributions from your employer, helping you reduce debt and grow your savings.
The SECURE 2.0 Act enables employers to enhance their benefits packages by supporting employees’ financial health in a new way. By aligning student loan payments with 401(k) matching, employers can offer a competitive advantage that helps attract and retain top talent.
Don’t miss out on this powerful benefit—start your journey to a more secure financial future today.
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