Last week, Sen. Ron Wyden (D-OR) introduced the Retirement Parity for Student Loans Act, which would allow some employed borrowers to save for their retirement by permitting employers to create a matching contribution allowance program for employees repaying their student loan debt.
Currently, an employer can choose to match a percentage of their employee’s personal contributions to their retirement plan accounts. Under this bill, employers could now contribute to their employees’ retirement plans, regardless of whether the employees are making contributions to their own retirement plans, if the employee is making payments towards their student loan debt. The bill would allow borrowers to pay off their loans while saving for retirement.
The employer can choose the percentage to match, but if the employer already has matching for a retirement plan in place, it must offer the same match percentage. For example, if an employer plan matches 100% if an employee contributes at least 5% of their salary to their retirement plan, the employer must also have a policy for a 100% match to the employee’s retirement plan if the employee makes payments on their student loans annually that equal at least 5% of their salary.
If an employee chooses to make a salary reduction to contribute to their retirement plan as well as make student loan payments, they would only receive the additional student loan matching if they haven’t already reached the maximum annual contribution amount to their retirement plan.
Publication Date: 5/23/2019