The IRS recently released a letter in response to and in favor of an employer’s proposal to amend its plan to offer a student loan benefit program.
Most employers today offer employees retirement plans allowing pretax contributions, such as 401(k) Plans, and have been looking for ways to assist their employees with addressing student loan debt. Under this proposal, employers are permitted to make a nonelective contribution to employees’ defined contribution plans, such as a 401(k).
The private letter ruling points to several important conditions including:
Below are the facts in the private letter ruling approved by the IRS:
While employers may not legally rely on guidance included in a private letter ruling issued to a specific employer, it is a sign for what the IRS may find acceptable. A detailed review of compliance with IRS nondiscrimination rules should be considered before adopting such a program. For more information about the 401(k) Plan-related student loan benefit program, please contact your Sikich advisor.
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