Federal Data Crackdown Poses Risks to 401(k) Student Loan Match

A federal government crackdown on consumer information leaks is threatening new tax code provisions designed to let employers help their workers save for retirement while paying off college debt. Industry groups representing the nation’s largest 401(k) plan sponsors are warning the IRS that federal loan servicers won’t be able to share data with recordkeepers under the 2021 Stop Student Debt Relief Scams Act (Pub. L. No. 116-251). As a result, it may be up to employers to police the system and verify worker loan repayment claims, steering businesses away from an already optional plan add-on. The SECURE 2.0 Act (Pub. L. No. 117-103) allows plan sponsors to count a worker’s student loan repayments as if they were retirement deferrals in order to make matching employer contributions. The provision allows young workers in particular to get a head start on retirement savings while focusing on paying off their educational debt.