DOE Regulation Impact

Beginning in 2024 and beyond, employers are entitled to make matching contributions to an employer-sponsored retirement plan based on an employee’s qualified student loan payments because of new options introduced by the SECURE Act 2.0. Employers are subject to certain certification rules to ensure that employers are, in fact, making the student loan payments. Under IRS guidance, employers can independently certify (1) the amount of the loan payment; (2) the date of the loan payment; (3) that the payment was made by the employee.  The Department of Education, however, has adopted new regulations via The Stop Student Debt Relief Scams Act that require student loan servicers to prevent third parties from accessing student borrowers’ data in an effort to prevent fraud.

We asked two professors and authors of ALM’s Tax Facts with opposing political viewpoints to share their opinions about whether the Department of Education regulations will negatively impact the availability of the employer-sponsored student loan match.

Below is a summary of the debate that ensued between the two professors.

Their Votes:





Their Reasons:

Byrnes: The Department of Education regulations are almost certain to have a chilling impact on employers' ability to offer the student loan matching option post SECURE 2.0. Student loan servicers are completely unable to provide third parties (meaning employers) with information about a student borrower's debt. That makes it impossible for the employer to verify that the employee is actually making valid student loan payments as required by law.

Bloink: These DOE regulations serve a critical function of protecting access to student borrowers' private information. While they may present an administrative hurdle for employers in offering the student loan match, it's certainly not a burden that is insurmountable or severe enough that it will deter employers from offering this valuable new benefit option.

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Byrnes: Without clearly enumerated exceptions, the student loan matching option will become yet another new employment benefit option that employers are simply unwilling to undertake given the risks. Employers simply won’t be willing to take the risk that their entire program could be disqualified based on failure to properly certify that the employer is making valid student loan payments as required.

Bloink: We have to weigh the benefits against the burdens in situations like this where we have potentially conflicting sets of regulations. We should also remember that employers can request documentation directly from the employee and still satisfy their certification obligations under the current IRS guidance. Self-certification is a completely valid option that eliminates the problems posed by the DOE’s restrictions on granting third parties access to private information.

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Byrnes: When employees are required to manually provide their information, we greatly increase the risk that errors will occur. It’s almost certain to happen. The risk of mistakes is likely to deter employers from offering the student loan matching benefit. The added burden of self-certification may even stop employees from taking advantage of the new option. The simpler we can make the process, the more likely it is that participation will be widespread. Service providers are in the best position to certify that any given employees is really paying down their student debt.

Bloink: It's entirely possible to set a workable application process for trusted third parties that will allow employers the access to information they require to verify compliance with the student loan matching rules. Protecting student borrowers’ personal information is a necessary and valuable step to preventing fraud. We can’t simply abandon the DOE’s protective provisions because it might be inconvenient for student borrower-employees to independently provide their employers with the documentation necessary to satisfy the IRS’ certification requirements.