The ERISA Industry Committee (ERIC) sent a letter to the Internal Revenue Service (IRS) commending it for issuing a Private Letter Ruling (PLR) to a plan sponsor permitting it to contribute to the company’s 401(k) on behalf of participants paying down student loan debt but not necessarily contributing to the 401(k) plan.
ERIC is asking the IRS to issue a revenue ruling that would broaden the reach of the guidance to enable all sponsors of 401(k) plans to make similar contributions, as Private Letter Rulings are directed only to the taxpayer requesting it.
“The recently issued PLR is a significant step in the right direction, but ERIC believes that more employers would be encouraged to implement retirement savings programs to assist individuals who are repaying student loans, similar to the one described in the PLR if the IRS would issue a revenue ruling or other guidance of similar applicability on this issue,” says Will Hansen, senior vice president of retirement and compensation policy at ERIC. “ERIC hopes the IRS will work with us to develop such a revenue ruling to make sure that it has the maximum impact in helping workers strapped with student loan debt to save for their retirement.”
Research has found that student loan debt greatly hinders workers’ ability to save for retirement. A recent study by the Center for Retirement Research at Boston College found that those with student loans have 50% less saved for retirement than those without student loans.