The Retirement Parity for Student Loans Act would permit 401(k), 403(b), and SIMPLE retirement plans to make matching contributions to workers as if their student loan payments were salary reduction contributions.
Senators Ron Wyden, D-Oregon, and Ben Cardin, D-Maryland, have introduced legislation that would allow 401(k), 403(b) and SIMPLE retirement plan sponsors to use their plans to provide student loan repayment benefits to employees.
According to a summary of the bill, The Retirement Parity for Student Loans Act would permit these plan sponsors to make matching contributions to workers as if their student loan payments were salary reduction contributions.
If an employer chooses to offer this benefit, then it must be made available to all workers who are eligible to make salary reduction contributions to the retirement plan and receive matching contributions on those salary reduction contributions.
The benefit cannot be provided to workers who are not eligible to participate in the retirement plan. The benefit only applies to repayments of student loan debt that was incurred by a worker for higher education expenses, and it is only available to employees who provide evidence to their employer of their student loan debt payments.
The Department of Treasury would be authorized to issue regulations prescribing the conditions under which employers may rely on evidence of student loan debt submitted by workers. The bill calls for the rate of matching for student loans and for salary reduction contributions to be the same. For example, if a 401(k) plan provides a 100% matching contribution on the first 5% of salary reduction contributions made by a worker, then a 100% matching contribution must be made for student loan repayments equal to 5% of the worker’s pay.
Special rules apply if a worker makes both salary reduction contributions and student loan repayments. Under those rules, student loan repayments are only taken into account to the extent that the workers has not made the statutory maximum annual contribution to the retirement plan.
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