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How does the student loan payment matching work?

Starting in 2024, the SECURE 2.0 Act allows employers with a SIMPLE IRA plan to treat employees’ qualified student loan repayments as if they were elective deferrals for the purpose of employer matching contributions.

This change ensures that employees who are directing money toward student loan repayment can still benefit from employer contributions to their SIMPLE IRA.

Eligibility requirements for the Student loan payments

For a student loan repayment to qualify under SECURE 2.0:

• The loan must be a qualified education loan as defined in Internal Revenue Code § 221(d)(1). This includes loans taken solely to pay qualified higher education expenses for the employee, their spouse, or their dependents.

• The loan cannot be from a related person or employer plan.

• Payments must be made for the employee’s own debt (not on behalf of someone else, unless it qualifies under IRS definitions).

• Employees must provide annual certification of the amount of qualified student loan payments they made during the year (the employer is not required to independently verify but must rely on reasonable employee certification).

How does it work?

If your employees are making student loan payments,  you can treat those payments as if they were elective deferrals to your SIMPLE IRA plan. This means you can provide matching contributions even when employees are not contributing directly to their SIMPLE IRA, helping them build retirement savings while they pay down student debt.

Let’s look at how this would work for one of your employees, 

Employee Salary: $50,000 per month

Employee Contributions:

• SIMPLE IRA = $500 per month

• Student Loan = $1,500 per month

Your plan offers dollar-for-dollar matching contributions to the SIMPLE IRA.

Scenario 1: If you have not adopted the SECURE 2.0 provision

• Only John’s 1% SIMPLE IRA contribution ($500) is treated as eligible for a match.

• You match $500 into his SIMPLE IRA.

• John does not receive any employer contribution based on his $1,500 student loan payments.

Scenario 2: If you have adopted the SECURE 2.0 provision

• John’s $1,500 in student loan payments count as if he had contributed them to the SIMPLE IRA.

• You contribute a $1,500 match into his SIMPLE IRA.

• Combined with his own $500 contribution, John’s SIMPLE IRA grows by $2,000 for the year.