Employer student loan assistance becoming more popular
Last month, an unnamed organization received a private letter ruling (PLR) from the IRS allowing student loan repayment assistance to be tied to the employees 401(k) plan. The IRS approved the 401(k) plan to allow employees to choose whether they would prefer a 5% contribution from the employer to be in the form of a 401(k) match or a student loan repayment. Participants would receive the contribution regardless of whether or not they are contributing to the retirement plan.
Student loan repayment assistance given directly to employees are treated as taxable income, while employer 401(k) contributions are not taxable. The approach in the PLR achieves tax advantages like those associated with traditional tuition-reimbursement benefits that are typically denied to student loan repayment benefits. The PLR is a step in the right direction for more widespread student loan repayment assistance; however, this ruling does not set a legal precedent and only applies to the company that submitted the request.
Don’t hesitate to contact The Howe Law Firm if you have questions about the tax treatment of your employer provided benefits and how they may affect your end of the year tax liability.