"You can be young without money but you can't be old without it . . . because to be old without it is just too awful…" — Tennessee Williams in "Cat on a Hot Tin Roof"
Walgreens recently announced the launch of a student loan 401(k) match program that will allow its employees to qualify for company
"With this new benefit, our team members are no longer faced with the difficult choice between managing their student loan debt and investing in a secure financial future – now they can confidently do both," noted Elizabeth Burger, EVP and chief human resources officer of Walgreens Boots Alliance.
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Walgreen's program is designed to comply with a retirement plan feature enacted into law as part of SECURE 2.0. Under this provision, 401(k) plans, 403(b) plans, SIMPLE IRAs and governmental 457(b) plans may treat qualified student loan payments (QSLPs) as elective deferrals for purposes of matching contributions. The effective date of Walgreen's
To be qualified, student loan matching contributions must meet a number of conditions. They include being made available for (a) all employees who are eligible for matching contributions on elective deferrals, except that a student loan matching program for nonunion employees need not cover union employees; (b) loans for the qualified educational expenses of an employee's spouse and dependents; (c) loans for educational expenses of any qualified institution and course of study; and (d) subject to the same matching contribution formula and allocation requirements that apply to employees who are actively deferring pay.
If all SECURE 2.O requirements are met, an employee may be eligible to receive a matching contribution on the loan payments up to the so-called 402(g) dollar limit ($23,500 for 2025) reduced by the employee's actual deferrals for the plan year.
Understanding that employers will be less inclined to adopt these programs if they impose significant administrative responsibilities, the IRS, in Notice 2024-63, established employee certification rules that greatly simplify QSLP program administration. SECURE 2.0 and Notice 2024-63 also provide flexible actual deferral percentage testing options for non-safe harbor plans.
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Under the certification rules, employees would certify to the following facts:
- If the loan was for the employee's educational expenses, the employee was an eligible student when the expense was incurred;
- If the loan was incurred for the educational expenses of a spouse or dependent, the individual on whose behalf the loan was obtained was a spouse or dependent at the time the expenses were incurred; the spouse or dependent was an eligible student when the expenses were incurred; and the employee is legally obligated to make loan payments under the terms of the loan (e.g., the employee cosigned the loan agreement);
- The expenses for which a loan was made are for "qualified" education expenses (e.g., tuition, room, board, books, fees);
- The expenses for which the loan was made were incurred within a reasonable period of time before or after the loan was made; and
- The amounts and dates of payments made during the plan year, and that the employee made the payments.
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Under IRS guidance in Notice 2024-63, employers may rely on an employee's certification with respect to some or all of the requirements in items 1 through 5, above. Under IRS guidance, options for employee certification include the following:
- The employer may rely on an employee's annual certification with respect to all of the requirements referenced in 1 through 5 above. The employee is not required to provide additional documentation to verify the certification.
- Employers that do not want to rely exclusively on an employee's certification with respect to whether 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 dependents, and that the loan was incurred by the employee may require the employee to "register" the loan with the plan. Registration occurs if, before the first loan payment is made, the employee provides information to the plan that the loan is an eligible loan. Loan registration is a one-time certification for the life of the loan (unless the loan is amended or refinanced). Affirmative certifications would be required for the payment requirements outlined in paragraph 5, above.
- Employers that do not want to rely exclusively on a certification regarding loan payments (item 5 above) could require verification by requesting a schedule of payment amounts and dates from the loan vendor. Allowing loan payments to run through payroll would verify that the employee actually made the payments. Alternatively, if the employer notifies the employee of the loan information received, and that it intends to assume that the employee will make the scheduled payments, the employee is deemed to have certified the payment terms if the employee does not correct any incorrect information in the notice within a reasonable period of time. An employer may rely on a deemed (or "passive") certification unless it has actual knowledge to the contrary.
SECURE 2.0's student loan matching programs should be of particular interest to individuals pursuing careers in health care, law and education who are likely to have student loan debt well into the six figures. The provision enables them to take full advantage of their employer's matching contribution without reducing their take home pay. This strategy, coupled with a robust program designed to help employees understand the importance of retirement savings, should pay dividends for employers competing for talent.
