Related: Save for retirement or pay off student loans? SECURE 2.0 will help employees do both

Plenty of administrative questions abound about this section of SECURE 2.0, including the ability and willingness of plan recordkeepers to set up for this newly available feature. However, the SECURE 2.0 legislation does provide some helpful administrative clarity upfront: (1) employers making matching contributions on student loan payments may rely on an annual certification by an employee that such payments have been made (rather than having to obtain proof of actual payments); and (2) employers will be permitted, in a manner to be clarified by Treasury regulations, to make matching contributions for qualified student loan payments at a different frequency (for example, monthly) than matching contributions are otherwise made under the plan (for example, weekly), provided that the matching contributions for student loan payments are made at least annually. There is one further complication under current law to the way student loan payments are treated for tax purposes under the Code. Under both SECURE 2.0 and the federal income exclusion on employer payments until 2026, a "qualified education loan" has the meaning in Section 221(d)(1) of the Code, which governs interest payments on education loans. Notably, Section 221(d)(1) defines a "qualified education loan" to include "any indebtedness incurred by the taxpayer solely to pay qualified higher education expenses . . . which are incurred on behalf of the taxpayer, the taxpayer's spouse, or any dependent of the taxpayer". But the temporary income exclusion under Section 127 is restricted to employer payments on such loans that are "incurred by the employee for education of the employee". Therefore, this tax-free benefit of employer payments toward student loans generally (up to $5,250 per year under Section 127) is expressly limited to an employee's education. It does not include employer payments towards loans for an employee's spouse or dependents. Section 110 of SECURE 2.0, on the other hand, does not include such a restriction. Therefore, although it is expected that the Treasury Department will issue regulations to implement SECURE 2.0's student loan provision and hopefully remove some of this confusion, it does appear that SECURE 2.0 would authorize an employer match for employees who have incurred student loan expenses for themselves, their spouses or their dependents, consistent with the definition of a qualified education loan in Section 221(d)(1).

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SECURE 2.0's student loan match takes effect in 2024: Are you up to speed?

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