Question: Joe Williams is an employee of a corporation that sponsors a 401(k)-retirement plan. The employer has announced in 2024 that it is amending its plan to accommodate the provisions made in the SECURE 2.0 Act (Div. T. of Pub. L. No. 117-328 §110). Specifically, it will treat qualified student loan payments made by employees as 401(k) contributions for the purpose of receiving company matching contributions to the 401(k) plan.
Regarding Joe’s personal taxes, and assuming all other requirements being met, will the student loan payments that qualify him for company 401(k) matching also qualify Joe for the Retirement Savings Contribution Credit (aka the saver’s credit under §25B) when filing his personal return?
Answer: No. PL 117-328 §110(c)(13)(B)(ii) states: “Student Loan payments not treated as plan contributions…”. The saver’s credit is available for personal contributions (before tax or after tax) to an IRA or ROTH IRA, employer-sponsored retirement plans employee contributions (such as 401(k), 403(b), and SIMPLE plans), or an Achieving a Better Life Experience (ABLE) account made by the participant as direct contributions or employee deferrals, but not employer contributions or matching contributions made by the employer. Student loan payments given the special treatment under SECURE 2.0 as noted above are specifically NOT treated as plan contributions and therefore do not qualify Joe for the saver’s credit. IRC Sec 25B(d).
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