top of page

Sign Up for
News & 

Thanks for subscribing!

Secure 2.0 – Treating Student Loans as Elective Deferrals

SECURE 2.0 was signed into law in December 2022 as part of the Consolidated Appropriations Act of 2023. Effective for plan years beginning after 2023, certain types of plans containing elective deferral features may choose to treat student loan payments as elective deferrals and make matching contributions on those amounts. These optional provisions are available to 401(k) plans, 403(b) plans, SIMPLA IRAs, and governmental 457(b) plans.


The new law is intended to assist employees who are unable to take advantage of employer matching contributions because they are burdened by student debt and cannot afford to make elective deferrals from their pay to receive the maximum matching contributions to which they would otherwise be entitled. The new law provides clarity on how the contributions are treated, and their effect on nondiscrimination testing. It defines qualified student loan payments as any amount paid towards indebtedness incurred for an employee’s (not their family or dependents) qualified higher education expense.

How it works

Although we are expecting guidance from the IRS, the statute contemplates that employees will make student loan payments and certify those payments to the employer. The employer matches those amounts in the plan using the plan’s match formula and subject to the plan’s vesting schedule. If adopting these provisions, all employees eligible to make elective deferrals and receive match must be eligible to receive match on student loan payments. The maximum student loan payments that may be considered is the lesser of the 402(g) or 415(c) limits applicable to the employee for the year minus elective deferrals made. The match on student loan payments may be made at the same frequency as other match but is not required to adhere to the same frequency. In any case, the match on student loans must be made at least once a year.

Testing Considerations

The student loan payments are not considered plan contributions, and thus not subject to the requirements of ADP testing, 415 limits or the Average Benefits Test. The plan may perform a separate ADP test for the employees who were matched on student loans. SIMPLE IRAs, plans with a safe harbor arrangement, QACA, or starter 401(k) plans may treat the student loan payments as elective deferrals or after-tax contributions for the purpose of making matching contributions. The matching contributions are plan contributions and subject to testing, which can be performed separately for employees who received matching contributions on student loan payments.

Key Takeaways

Once available starting in 2024, this new option will be a great tool to attract and retain top talent. Employers who are interested should contact their plan service providers to get more information and get in line to start implementation – we expect a lot of demand for this new opportunity!

Our attorneys can help you navigate this complex and evolving area of law. Please contact a Boutwell Fay attorney at for more information.


bottom of page