How Does One Implement a Student Loan Matching Benefit?

SECURE 2.0 allows sponsors to offer retirement matching contributions for participant student loan payments.

The SECURE 2.0 Act passed Congress on Friday as part of the $1.65 trillion spending bill and will become law pending signature from President Joe Biden. SECURE 2.0 would allow employers to offer matching 401(k), 403(b), 457(b) and SIMPLE IRA contributions if the participant elects to pay down student loans instead of contributing to a retirement plan. This option would be available starting after December 31, 2023.

How should plan sponsors go about implementing this provision, if they choose to?

Barrett Scruggs, the vice president of workplace financial wellbeing at SoFi at Work, says implementing this provision will be “relatively straightforward for plan sponsors.” Sponsors should be able to rely on existing administration fees and will not have to find new budget room to take on this option, according to Scruggs.

Scruggs says many employers will not match on a paycheck-by-paycheck basis. Instead, an employee could upload loan statement documents to the plan provider or enroll the loan information into their retirement account, then receive an end-of-year matching contribution. Scruggs expects this would be the easiest way to administer the provision, though paycheck-by-paycheck contribution matching would certainly be feasible using the same methods.

Employers can also rely on employee self-certification for matching. If an employee certifies that they were paying off loans, the sponsor can rely on that for the purposes of matching and will not need to go through a potentially tedious process of monitoring and verifying those payments on a payment-by-payment basis.

However, administrators will check payments throughout the year and will want to make sure they have payment verification procedures in place.

Scruggs expects a quick uptake on this policy because there is a lot of interest among plan sponsors, according to preliminary conversations he has had. He explains that financial wellness benefits are important for “the war for talent” among employers, and that financial wellness benefits, like this one, are very important for employee retention.

Kirsten Hunter Peterson, the vice president of thought leadership at Fidelity Investments, says Fidelity has been preparing to administer this benefit, and interested sponsors have until the end of 2023 to discuss this policy with their administrator. Hunter Peterson says that debt is “a financial and emotional burden” which prevents many young workers from buying a home or starting a family.