Section 110 of the SECURE 2.0 Act of 2022 allows employers to make matching contributions toward employees’ qualified student loan payments (QSLPs) to 401(k) plans, 403(b) plans and governmental 457(b) plans (and SIMPLE IRAs plans not summarized in this blog). Internal Revenue Service (IRS) Notice 2024-63 dubbed this optional plan design feature a “QSLP match” and answered FAQs to assist plan sponsors in implementing QSLP match programs.

Interested plans sponsors and service providers have been waiting for guidance on how to implement QSLP match programs. Guidance in this notice applies for plan years beginning after December 31, 2024, and IRS anticipates issuing proposed regulations to continue with the full rulemaking process for SECURE 2.0 Act Section 110.

Here are selected highlights of QSLP match guidance focusing on what type of loans are covered, whether employers can limit categories of eligible employees or eligible loans, and whether employees can self-certify that the loan payments satisfy the requirements under SECURE 2.0. 

One-Minute Summary

• Plan sponsors cannot limit QSLP matches to student loans for the employee’s own education.
• Plan sponsors cannot limit QSLP matches based on who the student was; rather, the match is based on the employee’s legal obligation to make payments under the terms of the student loan agreement. An employee could be the parent or spouse of the student.
• Plan sponsors cannot limit QSLP matches based on the level of degree program or the school attended. All employees covered by a plan are treated uniformly; eligibility restrictions based on any subcategory are not permitted.
• Plans can rely on an employee’s annual certification that a loan payment satisfies the requirements to be a QSLP without requiring any supporting documentation.

Qualified Loans and Payments

What is a qualified education loan?

Section 221(d)(1) of the Internal Revenue Code defines a qualified education loan as any indebtedness incurred by a taxpayer solely to pay qualified higher education expenses.

The qualified higher education expenses must be: 

1. Incurred on behalf of the taxpayer, the taxpayer’s spouse or any dependent of the taxpayer as of the time the indebtedness was incurred
2. Paid or incurred within a reasonable period before or after the indebtedness is incurred
3. Attributable to education furnished during a period during which the recipient was an eligible student.

What is a QSLP?

The SECURE 2.0 Act uses the terminology above in its definition of a QSLP. A QSLP is a payment made by an employee in repayment of a qualified education loan (as defined in section 221(d)).

A QSLP is a payment that meets the following criteria.

1. Made by an employee during a plan year in repayment of a qualified education loan incurred by the employee to pay for qualified higher education expenses of the employee, the employee’s spouse, or the employee’s dependent.
2. That does not exceed, when aggregated with elective deferrals for the year, the annual deferral limit in effect for the year (which in 2024 is $23,000, or $30,500 for age 50 or older)
3. That is certified annually by the employee (See Q&A A-1.)

What does incurred by the employee mean?

For a qualified education loan to be treated as incurred by the employee, the employee who makes a payment on the qualified education loan must have a legal obligation to make the payment under the terms of the loan. In general, a cosigner has a legal obligation to make payments under the terms of a loan, but, unless the primary borrower defaults under a loan, a guarantor does not have a legal obligation to make payments under the loan. For example, if an eligible employee is a cosigner on a qualified education loan for the employee’s dependent, both the eligible employee and the dependent may have a legal obligation to make payments under the terms of the loan. However, only the individual who makes payments under the qualified education loan can receive a QSLP match on account of those payments. (See Q&A A-1.)

Eligibility for QSLP matching

Can plans limit QSLP matches based on certain categories?

Plans may not limit QSLP matches based on the following:

1. Loans for an employee’s own education
2. Loans for a particular degree program (e.g., bachelor’s degree, master’s degree or doctoral degree)
3. Loans for attending a particular school. (See Q&A A-4.)

The requirement of uniform treatment for elective deferral matches and QSLP matches applies to all employees covered by a plan, so that employees may not be excluded from QSLP matches based on an individual employer, a business unit, a division, location or any other similar category. (See Q&A A-5.)

QLSP Certification

Must the employee certify that the loan payment satisfies the requirements to be a QSLP?

Yes, employees can self-certify without proof. Additional reasonable procedures for verification with a lender or requiring the student loan payment be done via payroll deductions are permitted.(See Q&A B-1.) IRS suggests procedures for loan registration and/or certification in detail in Q&A B-2.

What items of information about a qualified education loan payment must be received by a plan for the QSLP certification requirement to be satisfied?

The following items of information must be received by a plan or recordkeeping vendor:

1. Amount of the loan payment
2. Date of the loan payment
3. Proof the payment was made by the employee
4. Evidence that the loan being repaid is a qualified education loan and was used to pay for qualified higher education expenses of the employee, the employee’s spouse or the employee’s dependent
5. Verification that the loan was incurred by the employee. (See Q&A B-2.)

Must a plan require that an employee submit verification or documentation in support of an employee’s certification of a QSLP?

No, it is a reasonable procedure for a plan to rely on an employee’s annual certification that a qualified education loan payment satisfies the requirements to be a QSLP, without requiring any supporting verification. (See Q&A C-3.)

What is the appliable date?

IRS Notice 2024-63 applies for plan years beginning after December 31, 2024. For plan years beginning before January 1, 2025, a plan sponsor may rely on the guidance in Notice 2024-63 as a good faith, reasonable interpretation of SECURE 2.0 Act section 110.

Next Up: Proposed Rules

In IRS Notice 2024-63, Treasury and IRS requested comments on SECURE 2.0 Act section 110 that they can use when issuing proposed regulations in the future.

Read the notice for guidance on many other aspects of QLSPs like timing and frequency of employer contributions, nondiscrimination testing, SIMPLE IRA plans, nonqualified deferred compensation (NQDC) plans and more. Check the International Foundation’s SECURE 2.0 Act toolkit for the latest guidance and analysis.

Developed by International Foundation Information Center staff. This does not constitute legal advice. Please consult your plan professionals for legal advice.