Tips For Offering Student Loan Benefits Under 401(k) Plans

By Richard Chargar, Pamela Kaplan, Christine Quier-Sheth and Marc Nawyn (September 24, 2018, 3:01 PM EDT) -- Over 44 million Americans have outstanding student loan debt totaling in excess of $1.5 trillion, with the average borrower owing more than $32,000. A 2016 study by the Employee Benefit Research Institute found that families headed by employees ages 45 through 54 with no student loan debt had a median defined contribution plan account balance that was 2.7 times larger than those with student loan debt. In a move that could help employers encourage greater retirement savings among employees with student loan debt, the IRS recently ruled that employer nonelective contributions to a 401(k) plan for employees who make student loan repayments would not violate the Internal Revenue Code's "contingent benefit rule." That rule prohibits an employer from making any benefit — other than matching contributions — contingent, directly or indirectly, on an employee's making, or not making, elective deferrals under the 401(k) plan. As described in further detail below, the IRS's ruling means that employees who make student loan repayments in lieu of plan contributions would no longer have to lose the economic benefit of the employer matching contributions that they would have received in connection with such foregone contributions....

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