The Hassle(s) With Student Debt Matching

  Despite a lot of enthusiastic support for SECURE 2.0’s qualified student loan matching provision (QSLP match), employers don’t seem to be adopting that provision. Maybe there’s a reason — or two.

Recently only 12% of sponsors answering Callan’s annual DC survey said they had decided to offer employer-retirement account matches on qualified student loan payments, while 49% said no and 39% said they were still deciding — and that’s a survey that skews toward larger plans, generally viewed as early adopters.

Those tepid numbers have been validated in several reader polls conducted by the Plan Sponsor Council of America (PSCA). In 2023, only 2.2% of respondents said they offer or will offer the program during the year. In 2024, it was 4.7%. In the January 2025 poll covering 154 responses, the adoption rate was just 2.6%. Oh, and the “no” votes over the years were, shall we say, “emphatic”: 66.2%, 64% and 74.7% respectively, according to Pensions and Investments.

While I understand and appreciate the impact that college debt can have on retirement savings, I’ve never been a big fan of this particular provision (albeit voluntary) of SECURE 2.0. My ambivalence[i] was borne out of a sense that I saw no reason to set out college debt for special treatment. It is, after all, a financial obligation willingly undertaken — but then, so are things like a mortgage, a car payment, or even rent. And data suggests that those taking on the biggest burden are either from higher-income households, in pursuit of professions that will result in higher incomes (law, medicine), or both.

Despite those concerns, much was made of the need for this provision, and there was a LOT of enthusiasm in the industry and industry press both prior to, and when it was included in SECURE 2.0. 

So, what happened?

Well, any number of things, surely — but I figured it was going to stall out when I first saw IRS Notice 2024-63, the aptly titled “Guidance Under Section 110 of the SECURE 2.0 Act with Respect to Matching Contributions Made on Account of Qualified Student Loan Payments.” 

Don’t get me wrong — I feel like the drafters of that guidance bent over backwards to try and make it easy for those with student debt to take advantage of the option. But at the same time, when you consider the administrative work that would need to make this a reality…

So, first off, we’re not just talking about the employee’s debt — and while it has to be something THEY are legally obligated to pay, it could be theirs, their spouses, or for a dependent. Those payments have to be made within the calendar or plan year in which they occur, and they are — as one would expect — subject to the 402(g) limits ($23,500 in 2025). So presumably those payments are impeding THEIR savings availability. Presumably.

The guidance allows the plan sponsor to take the employee’s word for it — well, at least in the form of an annual certification from the employee[ii] with regard to the amount, payment date, and loan classification, etc. Most of this on annual basis (hassle #1 — see footnote 2 for a potential hassle #2), though technically a plan can impose a reasonable deadline or deadlines for a participant to claim the match (three months after the end of the plan year is deemed “reasonable”). As a practical matter, this means the match cannot be made on a payroll basis, which many employers prefer — so, hassle #3.

Oh, and while there are provisions for a separate ADP/ACP test, that remains a timing issue (hassle #4). What do you do if someone terminates after they’ve made loan repayments, but before you’ve made the match? That would be hassle #5. Oh, and can the employee — if the plan allows workers to designate employer contributions as Roth — request that these matches be Roth as well? Well, yes, as it turns out — but if the employer has already allowed for this option — well, they’re already familiar with that “hassle” (#6).

And then, for plan years starting after Dec. 31, 2023, employers can offer the QSLP match to any employee eligible to participate in the DC plan, even if the employee isn’t contributing to the plan. Which might be another hassle (#7, if you’ve lost count). See where I’m going?

Over the past couple of years there’s been a tendency (if not a trend) to leverage the success of the 401(k) to solve or ameliorate a number of larger financial concerns (emergency savings, retirement income, financial wellness). I get it. One of my favorite aspects of SECURE 2.0 was how many of its provisions were optional — and employers are, thankfully, free to construct their benefit programs in ways that allow them to attract and retain the workers they need in the ways that make sense, and to take advantage of the tax laws to do so.

That said, I’m not surprised that a plan sponsor who has sat down with their advisor and their recordkeeper might well consider implementing a student loan match program to be more “hassle” than it’s worth. 

I guess I’m most surprised that some are trying to make this work, regardless.

• Nevin E. Adams, JD

 

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[i] For a more comprehensive exposition, see What's So Special About College Debt?

[ii] One of the concerns I have heard from plan sponsors is what happens when somewhere down the road it turns out the information provided by the employee turns out to be wrong, and corrections are required? Well, as it turns out, Q&A E-4 provides that the plan is not required to make a correction.