PLANADVISER - January/February 2019 - 42
beyond(k)
Student Loan Debt Relief
A
How to help workers alleviate the burden so they can begin to save
private letter ruling (PLR) issued by the IRS last May
has gained much attention from plan sponsors and
advisers.
had made the request, offers a 401(k) plan under which,
when eligible employees electively defer at least 2% from
their paycheck of their compensation to repay student loan
debt, the company makes a 401(k) matching contribution
equal to 5% of their compensation.
The plan sponsor proposed to amend its plan to add a
student loan benefit program under which it would make
a 5% employer nonelective contribution on behalf of any
employee who makes student loan repayments (SLRs) of
at least 2% of his eligible compensation. The proposed
program would be voluntary-an employee would have
to elect to enroll and, once he had done so, could opt out
on a prospective basis. Employees who participated in the
program would still be eligible to make elective contributions
to the 401(k) plan, but those contributions would not
qualify for Abbott to match.
Such an employee would, however, be able to receive SLR
nonelective contributions and true-up matching contributions
as appropriate.
The IRS gave its stamp of approval to the plan amendIn
the ruling, the agency explained that Abbott, which ment because an employee who makes
student loan
payments, and thereby receives SLR nonelective contributions,
may continue to save in Abbott's plan. The
" contingent benefit " prohibition of Sections 401(k)(4)(A)
and 1.401(k)-1(e)(6) of the Internal Revenue Code (IRC)
prohibits an employer from conditioning " other benefits "
on an employee's making, or not making, Section 401(k)
contributions. Abbott's SLR nonelective contributions will
not be conditioned, directly or indirectly, on the employee
electing to defer to the retirement plan, but made if
he defers toward his student loan. Therefore, the IRS
concluded that the company's proposal to amend its plan
to provide SLR nonelective contributions will not violate
the contingent benefit rule.
IRS PLRs are directed exclusively to the taxpayer/s
requesting them-in this case, Abbott. But, as Jeffrey Holdvogt,
a partner with McDermott Will & Emery in Chicago,
says, " The IRS doesn't tend to give one ruling to one requestor
40 | planadviser.com January-February 2019
Art by Doris Liou
http://www.planadviserdigital.com/planadviser/january_february_2019/TrackLink.action?pageName=40&exitLink=http%3A%2F%2Fplanadviser.com
PLANADVISER - January/February 2019
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PLANADVISER - January/February 2019 - Cover3
PLANADVISER - January/February 2019 - Cover4
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https://www.planadviserdigital.com/planadviser/november_december_2020
https://www.planadviserdigital.com/planadviser/september_october_2020
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https://www.planadviserdigital.com/planadviser/november_december_2018
https://www.planadviserdigital.com/planadviser/september_october_2018
https://www.planadviserdigital.com/planadviser/july_august_2018
https://www.planadviserdigital.com/planadviser/may_june_2018
https://www.planadviserdigital.com/planadviser/march_april_2018
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https://www.planadviserdigital.com/planadviser/july_august_2017
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