Student Loan Repayment Bill Is Re-Introduced

Senator Ron Wyden (D-OR) has re-introduced the Retirement Parity for Student Loans Act, a bill intended to allow employers to make contributions to 401(k), 403(b), and SIMPLE IRA plans in amounts that have a matching relationship to an employee’s student loan debt repayments.

The legislation was previously introduced in December 2018, in the last days of the 115th Congress. Though the conditions are not identical, the legislation may in part be a response to a 2018 IRS private letter ruling on an employer request to make retirement plan contributions based on employees having made student loan debt repayments.

Some of the bill’s key provisions are as follows.

  • Only employees’ higher education loan repayments (not loans for private secondary or elementary expenses) would qualify for such employer contributions.
  • Employer contributions matched to employee student loan debt repayments could not exceed the annual deferral limit appropriate to the employer’s plan (e.g., 401(k) vs. SIMPLE IRA plan deferral limit), reduced by such employee’s elective deferrals into the retirement plan; all amounts together must not exceed the employee’s compensation.
  • Only employees eligible to defer into the employer’s retirement plan may receive student loan matching contributions.
  • All employees who are eligible to receive retirement plan matching contributions must be eligible to receive student loan matching contributions.
  • For purposes of satisfying nondiscrimination requirements in providing retirement plan benefits, rights, and features, those who have no student loan debt—and, therefore, would not receive student loan matching contributions—would not be considered as having been denied a benefit, right, or feature.
  • The Secretary of the Treasury would be directed to issue regulations governing such arrangements.
  • As proposed, the legislation would be effective for 2020 and later years (plan year was not specified).