Student loans remain a major issue for younger professionals. Many of these professionals now choose to prioritize student loan payments over saving for retirement, something that makes sense presently but can lead to financial consequences in the future. When businesses look for ways to attract top talent, they want to be able to address the concerns the talent has by offering benefit packages that are in line with that individual’s economic reality. To this end, the IRS has been looking at methods by which employees can make student loan payments while businesses help these same employees save for retirement.
IRS Makes Student Loan Repayment a Priority
A new notice from the IRS, its 2019-2020 Priority Guidance Plan (PGP), includes information on providing guidance for employee benefit plans that combine student loan payments with qualified retirement plans. Already, individual employers have asked the IRS for guidance on benefit plans linking the two, and as these types of requests increase employers are asking the IRS to issue broader guidance for companies looking to use these types of plans to attract talent.
This conversation with the IRS is happening in conjunction with legislation and pressure from legislators to address student loan repayment. The common theme is creating a link between student loan repayment requirements and the ability to set aside money in retirement accounts, with the goal of allowing employees to repay loans while employers treat these loan repayments similar to a 401(k) plan elective contribution and make matching contributions into a qualified retirement fund.
Other Issues on the IRS’s Radar
Over the coming year, the IRS plans to address other concerns related to retirement plans, including updates and revisions to the Employee Plans Compliance Resolution System (EPCRS). This program is designed to identify and correct problems in retirement plans in a timely and efficient manner. Further changes include revising life expectancy tables, updated guidance for IRAs, and guidance on retirement plans offered by affiliated service groups and churches.