Under the new Secure 2.0 retirement law, employees repaying student loans can now qualify for a retirement account match from their employers. This provision could benefit nearly a third of the 42 million student loan borrowers with retirement accounts, although its broad implementation remains uncertain. Rather than choosing between student loans and making retirement contributions, the law allows employees to receive a matching contribution even if they fail to meet certain matching requirements.
Data from JPMorgan reveals that a quarter of borrowers reduced their retirement contributions by 2.7% once student loan repayments started. However, under the new law, these employees could potentially maintain similar retirement savings levels as if they had no student debt.
While this feature may increase costs for employers, it could improve talent attraction and retention, according to Olivia Mitchell, a professor at the University of Pennsylvania. However, a slow adoption is expected, with a 2024 survey from Alight showing only 10% of 87 organizations likely to add this benefit, and nearly 40% uncertain of ever offering it.
The new provision's success depends on employers opting in and employees choosing to avail it, notes Mark Kantrowitz, a financial aid expert. As per the recently released IRS guidance, employees wishing to qualify must certify loan payment information with their employer.
Despite these hurdles, the provision could begin emerging within a few years, according to Katie Brewer, a CFP and founder of Your Richest Life.