E1: 07: How To Address Secure Act 2.0 Section 110 for Treatment of Student Loan Payments as Elective Deferrals for Purposes of Matching Contributions (Doc ID 2985766.1)

Last updated on NOVEMBER 13, 2023

Applies to:

Goal

The Consolidated Appropriations Act of 2023 (HR 2617) was signed into law in December 2022. This included a number of provisions to “expand coverage and increase” employee retirement savings which are referred to as the SECURE Act 2.0. For a detailed list of provisions, you may consult the US Senate’s “Secure 2.0_Section by Section Summary 12-19-22 FINAL” document available for download here: https://www.finance.senate.gov/imo/media/doc/Secure%202.0_Section%20by%20Section%20Summary%2012-19-22%20FINAL.pdf.

The goal of this document is to provide a solution for section 110.

Section 110, Treatment of student loan payments as elective deferrals for purposes of matching contributions. Section 110 is intended to assist employees who may not be able to save for retirement because they are overwhelmed with student debt, and thus are missing out on available matching contributions for retirement plans. Section 110 allows such employees to receive those matching contributions by reason of repaying their student loans. Section 110 permits an employer to make matching contributions under a 401(k) plan, 403(b) plan, or SIMPLE IRA with respect to “qualified student loan payments.” A qualified student loan payment is broadly defined as any indebtedness incurred by the employee solely to pay qualified higher education expenses of the employee. Governmental employers are also permitted to make matching contributions in a section 457(b) plan or another plan with respect to such repayments. For purposes of the nondiscrimination test applicable to elective contributions, Section 110 permits a plan to test separately the employees who receive matching contributions on student loan repayments. Section 110 is effective for contributions made for plan years beginning after December 31, 2023.

Solution

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