Employees with Student loan debt are provided a new boon through a 401(k) Student loan benefit program with new private letter ruling under certain circumstances.

The IRS made public PLR 201833012, released on August 17, 2018, which clarifies circumstances for a 401(k) plan to offer a student loan benefit program. The program would allow the employee to prioritize paying down their student loan, while still receiving the company match.

The criteria to qualify for the program included:

  • Be a full or part-time employee who qualifies for the company 401(k) plan
  • Contribute two percent of their eligible pay toward student loans through payroll deductions

The most desirable aspect of this program is that the young worker can focus on paying their student loan debt down, while not foregoing saving for retirement, as has happened in the past. This approach also avoids tax triggers that occur when employers try to directly assist employees by paying down their debt, thus creating taxable income.

An amendment to the employer’s plan may be required to permit this type of non-elective contribution. Consult with your plan record keeper or ERISA attorney if you are interested in participating in this program.

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Please contact a member of Barnes Dennig’s Employee Benefit Plan Team if you have any questions about this program or any other related benefit plan matters.

Disclaimer: private letter rulings are very fact specific, and cannot be relied upon by all companies unless identical fact patterns.