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Student Loan Debt and 401(k) Plans

Posted by David Guadagnoli on Aug 21, 2018 12:29:51 PM

By David Guadagnoli and Amy Sheridan

A new ruling was released last Friday by the Internal Revenue Service that presents a very intriguing possibility for employers looking to economically support employees with student debt burdens. The idea is that an employee can receive the economic equivalent of a 5% matching contribution, even if he or she is not actually making 401(k) contributions but is instead actively paying down student debt. The ruling, which can be relied upon only by the taxpayer to whom it was issued, addresses the very technical question of whether such an arrangement violates the so-called contingent benefit rule under Internal Revenue Code Section 401(k)(4)(A), a particularly arcane area of the arcane law of employee benefits.

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Topics: student debt, 401(k) contributions, contingent benefit rule, student loan, matching contribution

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