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IRS approves employer's 401(k) incentive for student loan payments

August 24, 2018 / Katie Clarey

The IRS made public a private letter ruling last Friday in which it allowed an unnamed employer to amend its 401(k) plan to contribute to the retirement accounts of employees making payments on their student loans. To participate in the program, employees must make student loan payments of at least 2% of their salary. They do not need to be putting any money away for retirement to qualify for the benefit. The money the company will contribute to an employee’s 401(k) will not undergo tax deductions, which distinguishes the measure from other student loan benefit programs. When an employer gives money directly to an employee who uses it to pay student loans, the IRS considers those funds taxable income. But any money the company puts into a 401(k) will have a tax-free status. Healthcare company Abbott announced in June that it would begin offering this retirement-student loan hybrid benefit. Lawyers at Groom Law Group say they suspect, in fact, that Abbott is the unnamed company fr...