Secure 2.0 Act Qualified Student Loan Payment Contributions (QSLP)

At A Glance

• The IRS has introduced guidance on a new initiative where eligible employees who contribute to a qualifying retirement plan could receive matching employer contributions based on their qualified student loan payments (QSLPs).
• QSLPs include 401(k) plans, section 403(b) plans, SIMPLE IRA plans, and governmental section 457(b) plans.
• This new IRS guidance, released under Notice 2024-63, applies to contributions made for plan years beginning after December 31, 2024.

Summary

SECURE 2.0 Act Section 110 now allows employers to offer matching contributions to employees’ retirement plans based on their payments toward qualified student loans. The IRS recently provided guidance to help plan sponsors implement Qualified Student Loan Payment (QSLP) match programs. This guidance helps plan sponsors implement QSLP matching programs for 401(k), 403(b), SIMPLE IRA, and governmental 457(b) plans.

This initiative is part of broader IRS efforts to promote retirement savings and reduce disparities in accessing retirement funds. Although the legislation was enacted with an effective date of December 31, 2023, this guidance released by the IRS is effective for plan years beginning after December 31, 2024.

What is a Qualified Student Loan Payment?

The Internal Revenue Code (IRC) defines a QSLP as any debt incurred solely to pay for qualified higher education expenses, which include tuition, fees, and other necessary costs of attendance (i.e., books and supplies) for eligible students.

To qualify, the loan must meet the following conditions:

1. Incurred by the taxpayer (a.k.a employee), their spouse, or a dependent at the time the loan was taken.
2. Used for higher education expenses at an eligible educational institution.
3. Used within a reasonable time period before or after the expenses are incurred.

SECURE 2.0 Act Section 110: Matching Contributions

Under the SECURE 2.0 Act, a QSLP is eligible for employer matching contributions in certain retirement plans, provided the employee annually certifies the payment was made.

The IRS has not yet provided specific instructions for plan providers on how to execute this initiative, however Notice 2024-63 provides the following guidance:

• The QSLP matches must be provided on the same terms as traditional elective contribution matches.
• The QSLP matches must vest in the same manner as elective contribution matches.
• The plan providers may rely on the employee’s annual certification of QSLP payments for verification. No need to request any other documentation.
• A QSLP match feature may be added to a section 401(k) plan, a section 403(b) plan, a SIMPLE IRA plan under section 408(p), or a governmental 9 section 457(b) plan.
• The guidance in this notice is effective for plan years beginning after December 31, 2024.

Next Steps

Paylocity is working with our Product team to ensure our 401(k) provider partners are prepared for the upcoming changes and ready for any new data elements required to support retirement plans that adopt this feature.

Paylocity will continue to monitor for additional IRS notices and guidance as more detailed regulations for this initiative are expected soon.

Thank you for choosing Paylocity as your Payroll Tax and HCM partner. This information is provided as a courtesy, may change, and is not intended as legal or tax guidance. Employers with questions or concerns outside the scope of a Payroll Service Provider are encouraged to seek the advice of a qualified CPA, Tax Attorney, or Advisor.