What to Know About Qualified Student Loan Payment Matching

The capability for employers to match a student loan payment with a 401(k) contribution has been one of the most discussed provisions from the SECURE 2.0 Act, and it went into effect on January 1.

While the IRS offered a framework detailing how the rule operates, questions remain as to implementation, according to an expert adviser discussing the option in a webinar, June 5^,, held by third-party administrator The Retirement Advantage.

When it comes to setting up a qualified student loan match, plan advisers and sponsors should be clear on the timing of when the qualified student loan payments may be reported, said Andrew Larson, director of retirement education and advisor practice management at the Retirement Learning Center. Timing is essential, he said, because the timeline for these matching contributions is different than for a traditional 401(k) deferral match.

“Participants may claim qualified student loan matching after the close of the plan year, so they don’t have to claim pay period by period,” he said. “They can wait until the end of the year, determine their total payments and then claim the employer match. How exactly this will work is unclear now. We’re awaiting further IRS guidance.”

The details for participant end-of-year filing and how plan sponsors should accommodate it in a timely manner is among a few areas Larson said the IRS should offer guidance on. Other areas include how the employer matches will affect plan recordkeeping and discrimination testing, he noted. When it comes to tracking qualified student loan payment matching, Larson said, the payments should be included in the plan’s actual contribution percentage test. The ACP test is a nondiscrimination test that compares the average contribution percentage made into a 401(k) plan by highly compensated employees with that made by non-highly compensated employees. 

The qualified student loan payments themselves, which are made to the loan processor, are not included in the ACP test, but the match should be, Larson noted.

Furthermore, any ACP excesses must be identified and removed, typically within two and a half months after the close of plan year, he said. ACP excess is a situation where the average contribution percentage by highly compensated employees exceeds a specific limit relative to the average contribution percentage for non-highly compensated employees.

However, ACP testing won’t be complete until the close of the 90-day claiming period. The 90-day claiming period typically refers to a time frame within which employees must take action regarding their excess contributions in a retirement plan, such as a 401(k), after the end of the plan year.

When it comes to the level of matching funds that are available, contributions that go above the 402(g) limit, which sets the maximum amount of money employees may defer to their 401(k) plan each year, may not be matched. In 2024, that limit is $23,000.

Effectively, the traditional 401(k) rule for matching, in which you may match only up to the limit, remains in effect, Larson said.

Larson gave the example of State of Maryland employees with access to a 403(b) plan with a 25% employer match. An employee could notify the employer that $23,000 in student loan payments were made in 2024; the  district would then allocate the matching contributions to accounts on February 15, 2025, and the employee’s matching would be calculated up to the 402(g) limit.

More direction on student loan matching will be a focus for the retirement industry in coming months; the ERISA [Employee Retirement Income Security Act] Industry Committee representing employer benefit interests, for instance, recently included it in its list of priority items for the IRS and Treasury Department.