This bill has been introduced on the heels of the private letter ruling issued by the IRS stating that a 401(k) Plan can be amended to include a student loan benefit program. It not only includes a provision to allow for such student loan repayments, but also permits 401(k) plans that do so to continue to qualify as safe harbor plans for nondiscrimination testing purposes. The benefit, if voluntarily elected by the plan sponsor, would be available to all employees eligible to make salary reduction contributions to the plan and receive matching contributions on those monies.
The matching benefit applies to repayments of student loans incurred by employees for higher education expenses, and employees must provide evidence of their student loan debt. The rate of matching for student loans must be the same as for salary reduction contributions. Also, for those participants making salary reduction contributions and student loan repayments, the student loan repayments are taken into account only to the extent that employees have not made the maximum annual contribution to a retirement plan ($19,000 for 2019).
Clarification regarding nondiscrimination rules pertaining to 401(k) plans is also included in the bill. Such rules restrict the extent a retirement plan can benefit highly compensated verses non-highly compensated employees. The rules also provide for safe harbors for plans making certain matching contributions, inclusive of student loan repayments, or other employer contributions.
www.asppa.com; December 19, 2018.