In this private letter ruling, the IRS approved an innovative idea: allow employer nonelective 401(k) contributions to participants who do not defer any salary into their 401(k) but who do make student loan repayments. In its request, the company explained that it makes employer contributions of 5% to participants who elect to defer at least 2% of their salary to their 401(k). It proposed to amend its plan to allow the same 5% employer contributions for participants who make student loan repayments of at least 2% – even if those participants do not defer any salary under the 401(k) plan. This could be a great way for employers to help employees address burdensome student loan debt and prepare for retirement at the same time. As always, the devil is in the details, so be sure to talk to your benefits counsel before making a change.
401(k) Matching for the Student Loan Repayments