The IRS recently issued a Private Letter Ruling (PLR) for an employer interested in offering a student loan repayment benefit through their 401(k) plan. While the ruling only applies to the plan and plan sponsor who requested it, the ruling will most likely expand interest in this type of program, resulting in legislative action in the future.
For employees, student loan debt has swelled in recent years, creating a financial burden and limiting their ability to save for retirement.
For employers, high debt levels can lead to financial stress, which studies have shown leads to lower productivity. As a result, many employers are implementing programs to address student loan debt and in turn, will assist in recruiting and retaining the best talent. These programs include access to debt refinancing services, signing bonuses, and loan reimbursement programs. Many of these programs are helpful but offer no tax benefits to the employee. The PLR changes all that and may allow for tax favored strategies in the future.
For more information on this recent IRS determination or implementing one of the current student loan programs and how they may benefit your organization, contact our retirement planning team.
Click here for Part Two of Student Loan Considerations where we dive into the impact to your plan when considering this type of arrangement.
