8890.02 / What is a qualified student loan payment for purposes of the post-SECURE Act employer retirement matching option?

Only payments that are classified as qualified student loan payments (QSLPs) can be considered in the employer’s matching program. A qualified student loan payment is one that is made on a loan taken for the sole purpose of paying qualified education expenses for the individual, a spouse or someone who was the individual’s dependent at the time the debt was incurred. The loan must be for education provided during an academic period for an eligible student and the expense must be paid or incurred within a reasonable period of time before or after the debt was incurred.¹

Qualified education expenses include tuition, fees, books, and other similar required expenses incurred by an eligible student. An eligible student, in turn, is someone who is enrolled at least half-time (with at least six credit hours) in some type of program of study that is designed to lead to a degree, certificate or other type of recognized education credential at an eligible education institution.

Expenses incurred for games, sports, hobbies, or non-credit activities do not qualify.

The law does not specify whether the student must have graduated from or completed the program in order for the related student loan debt to qualify. Because the student loan matching program is entirely optional, it seems possible that the employer may be entitled to decide whether graduation is a requirement for receiving the benefit.

The IRS has provided interim guidance on QSLPs via Notice 2024-63, which is effective in 2025 (employers can rely on a reasonable, good faith interpretation during 2024).  Future regulations and guidance are expected.

In Notice 2024-63, the IRS clarified that the QSLP must be for the employee, the employee's spouse or dependents.  The employee must have a legal obligation to repay the loan, meaning that it must be either their loan or a loan they co-signed.  Absent the employee's legal obligation to repay, there is no QSLP.  If the employee did co-sign the loan, they must actually be making the payments for those payments to qualify as QSLPs.  When a dependent is making the payments, they are not QSLPs.

The maximum amount that can be treated as a QSLP for the year is the annual 401(k) contribution limit for the year (or, if less, the employee’s compensation for the year), reduced by the employee’s elective deferrals for the year.

All employees who are eligible to receive the match must be eligible for QSLPs.  The employer cannot restrict the match to a certain group of employees (an exception exists for collectively bargained employees), a certain type of loan or a certain type of educational institution or degree type.

The employer can require that the employee be employed at the last day of the year to receive the match, but only if the employee has a similar requirement for traditional matching contributions. The employer is entitled to make QSLP matches at a different frequency from elective deferral-based matching contributions.

The employer can establish one single QSLP match claiming deadline for the year, or can elect to establish multiple deadlines, so long as those deadlines are “reasonable”.  As an example, the IRS stated that an annual deadline that is three months from the end of the plan year would be reasonable, but earlier deadlines could also be found reasonable.

Loan repayments made in prior plan years cannot be matched in the current plan year.

Employee Certification

Employers must require that employees provide specific certification with respect to their QSLPs.  The employer can require a separate certification for each qualified education loan payment intended to qualify as a QSLP or permit annual certification that applies to all payments intended to qualify.

Certification must include the following information: (1) the amount of the loan payment; (2) the date of the loan payment; (3) that the payment was made by the employee; (4) that the loan being repaid is a qualified education loan and was used to pay for qualified higher education expenses of the employee, the employee’s spouse, or the employee’s dependent; and (5) that the loan was incurred by the employee.²  The employer can require affirmative certification of each element by the employee.  The employer can also independently verify the first three elements.