Empowering Employees: Leveraging SECURE 2.0 for Student Loan Repayment and Retirement Success

Historically, many employees have had to choose between paying down student loans and contributing to their 401(k) to secure an employer match. SECURE 2.0 eliminates this “either-or” dilemma. Under this provision, companies can provide a match into retirement accounts based on the payments an employee makes toward their student loans, even if the employee makes no direct 401(k) contributions.

Key Requirements and Features:

• Formula Consistency: A retirement plan must treat QSLP matches using the same formula as matches on participant deferrals.
• Eligible Debt: Loan repayments can be for the employee, their spouse, or a dependent, provided the employee has a legal obligation to make the payments.
• Certification: Employers can rely on an annual employee certification of payment, which must include the amount, date, and confirmation that the loan is for qualified higher education expenses.

Practical Impact: Real-World Examples

The benefit of this provision is best illustrated through practical scenarios:

• Scenario 1: Full Match without Direct Contributions Consider an employee earning $100,000 whose plan offers a 100% match up to 5% of compensation. If they pay $10,000 toward student loans, they will receive the full $5,000 employer match in their 401(k), effectively building retirement wealth while paying off debt.
• Scenario 2: Combined Contributions If the same employee contributes $2,000 directly to their 401(k) and pays $10,000 toward student loans, the employer considers the combined total. They would still receive the maximum $5,000 match, ensuring they don’t miss out on benefits due to their debt obligations.

The Future of Employee Benefits

While implementation systems for this feature are complete, it is currently more prevalent among larger companies. However, as employers seek more competitive ways to support their staff’s financial well-being, this feature is expected to gain wider use among smaller employers.

In addition to this retirement-focused provision, employers can also explore Employer Education Assistance Programs, which allow for up to $5,250 annually in tax-advantaged payments toward employee student loans.

By integrating these tools, Architectural firms can offer a robust support system that addresses the immediate stress of student debt while simultaneously laying the groundwork for a secure retirement

The AIA Trust is here to help

The AIA Trust offers retirement savings plans and distribution options through Equitable Financial Life Insurance Company (Equitable Financial) to assist you in achieving your retirement goals. Plans can be established for one-person firms (or components)—or for many employees—utilizing a variety of retirement savings and distribution vehicles. Equitable Financial can assist you toward achieving your goals based on over 50* years of experience working with association members and over 30 years with AIA architects. Equitable Financial can help you review your options and offer you choices that can help alleviate the burden of establishing and managing a retirement savings plan. It’s one of the ways that the AIA Trust makes it easier for you to focus on doing what you do best: architecture.

For additional information on these AIA-endorsed member benefits, or to schedule a meeting with a financial professional, please call Equitable Financial at (800) 523-1125 or visit at equitable.com/mrp.

This article has been written for general information purposes only. This material does not constitute an offer or solicitation of any kind and is not intended and should not be relied upon, as investment, tax, legal, or financial advice or services.

The Members Retirement Program is funded by a group variable annuity contract issued and distributed by Equitable Financial Life Insurance Company (Equitable Financial) NY, NY. Annuities have limitations and restrictions. For costs and complete details, contact a Retirement Program Specialist. Equitable Financial and its affiliates do not provide tax or legal advice. You should consult with your attorney and/or tax advisor before purchasing a contract.

* This reference applies exclusively to Equitable Financial Life Insurance Company.

Equitable is the brand name of the retirement and protection subsidiaries of Equitable Holdings, Inc., including Equitable Financial Life Insurance Company (Equitable Financial) (NY, NY); Equitable Financial Life Insurance Company of America, an AZ stock company with main administrative headquarters in Jersey City, NJ; and Equitable Distributors, LLC. Equitable Advisors is the brand name of Equitable Advisors, LLC (member FINRA, SIPC) (Equitable Financial Advisors in MI & TN).

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