Chippy Posted August 7, 2018 Share Posted August 7, 2018 Has anyone ever heard of Student Loan Genius? They say employees make their student loan payments and based on a payment, the company makes a pre-tax contribution into the employee's 401(k). I was just wondering how this would work and if anyone has any experience with it. Link to comment Share on other sites More sharing options...
Larry Starr Posted August 7, 2018 Share Posted August 7, 2018 Did you try googling them? I did. They have a website. You can read all about them. https://studentloangenius.com/ There is even an article about them and how it all works at https://lendedu.com/blog/student-loan-genius-work/ Hope this helps. Lawrence C. Starr, FLMI, CLU, CEBS, CPC, ChFC, EA, ATA, QPFCPresidentQualified Plan Consultants, Inc.46 Daggett DriveWest Springfield, MA 01089413-736-2066larrystarr@qpc-inc.com Link to comment Share on other sites More sharing options...
Chippy Posted August 7, 2018 Author Share Posted August 7, 2018 I read them, so it sounds like the employer would contribute a pre-tax contribution to the plan based on the student loan payments. How would these contributions be tested, in the ADP test? Would the employer report them along with the payroll 401(k) deductions? I have a client that is interested in this, they think it is a matching contribution, but again, how would it be tested? Was wondering if anybody used this and how it worked. Link to comment Share on other sites More sharing options...
formeractuary Posted August 7, 2018 Share Posted August 7, 2018 Abbott Labs recently introduced something similar to this as an option in their 401(k) plan. If you pay towards your student loans, you get a match in the 401(k). I believe they had to get a private letter ruling to do this. It's not clear from the press releases if they engaged this company to help pull this off. Seems like it would require some interesting and challenging work on the payroll side of things. http://abbott.mediaroom.com/2018-06-26-Abbott-Announces-Freedom-2-Save-Program-for-Employees-to-Address-Student-Debt Link to comment Share on other sites More sharing options...
Peter Gulia Posted August 7, 2018 Share Posted August 7, 2018 Chippy, should we assume that an employer-provided contribution allocated to a participant’s account because the participant made a student-loan repayment is not a matching contribution? 26 C.F.R. § 1.401(m)-2 https://www.ecfr.gov/cgi-bin/text-idx?SID=13eef7f159960c6c2f53a4aa6d7922c5&mc=true&node=se26.6.1_1401_2m_3_62&rgn=div8 If a retirement plan limits this allocation to non-highly-compensated participants (or limits the allocation for a highly-compensated employee to apply counting only the first $120,000 of compensation), how much should one worry about nondiscrimination? Peter Gulia PC Fiduciary Guidance Counsel Philadelphia, Pennsylvania 215-732-1552 Peter@FiduciaryGuidanceCounsel.com Link to comment Share on other sites More sharing options...
Larry Starr Posted August 7, 2018 Share Posted August 7, 2018 2 hours ago, Chippy said: I read them, so it sounds like the employer would contribute a pre-tax contribution to the plan based on the student loan payments. How would these contributions be tested, in the ADP test? Would the employer report them along with the payroll 401(k) deductions? I have a client that is interested in this, they think it is a matching contribution, but again, how would it be tested? Was wondering if anybody used this and how it worked. I don't think it is going to be subject to ACP testing. It is a profit sharing contribution I believe, so we are just dealing with regular non-discrim and since the employee is an NHCE, no problem. Lawrence C. Starr, FLMI, CLU, CEBS, CPC, ChFC, EA, ATA, QPFCPresidentQualified Plan Consultants, Inc.46 Daggett DriveWest Springfield, MA 01089413-736-2066larrystarr@qpc-inc.com Link to comment Share on other sites More sharing options...
ERISAAPPLE Posted August 7, 2018 Share Posted August 7, 2018 You have to make sure you are not violating the contingent benefit rule. I think Abbott labs set it up as a profit sharing contribution. I imagine testing is a mess unless it is only for NHCEs. Link to comment Share on other sites More sharing options...
Peter Gulia Posted August 8, 2018 Share Posted August 8, 2018 To meet 26 C.F.R. § 1.401(k)-1(e)(6), a cash-or-deferred arrangement must not condition a benefit (beyond a matching contribution and a few others the rule allows) on “the employee’s electing to make or not to make elective contributions under the arrangement.” The linked-to Abbott Labs announcement suggests the employer’s nonelective contribution is tied to whether a participant made a student-loan repayment.But the news release doesn’t fully describe the plan’s provision.Under some I can imagine, there might be an argument that the employer’s nonelective contribution also is conditioned, at least indirectly, on whether the participant elected not to make § 401(k) elective contributions. If that is the provision, is the effect one that that 26 C.F.R. § 1.401(k)-1(e)(6) should preclude? Peter Gulia PC Fiduciary Guidance Counsel Philadelphia, Pennsylvania 215-732-1552 Peter@FiduciaryGuidanceCounsel.com Link to comment Share on other sites More sharing options...
ERISAAPPLE Posted August 8, 2018 Share Posted August 8, 2018 2 hours ago, Fiduciary Guidance Counsel said: To meet 26 C.F.R. § 1.401(k)-1(e)(6), a cash-or-deferred arrangement must not condition a benefit (beyond a matching contribution and a few others the rule allows) on “the employee’s electing to make or not to make elective contributions under the arrangement.” The linked-to Abbott Labs announcement suggests the employer’s nonelective contribution is tied to whether a participant made a student-loan repayment.But the news release doesn’t fully describe the plan’s provision.Under some I can imagine, there might be an argument that the employer’s nonelective contribution also is conditioned, at least indirectly, on whether the participant elected not to make § 401(k) elective contributions. If that is the provision, is the effect one that that 26 C.F.R. § 1.401(k)-1(e)(6) should preclude? I had similar thoughts. The article does not explain things fully, but reading between the lines I think it works. It is impossible to know though without seeing the details. Nonetheless I have to assume counsel for Abbott Labs didn't miss the contingent benefit rule. Link to comment Share on other sites More sharing options...
Lois Baker Posted August 17, 2018 Share Posted August 17, 2018 A bit late to this dance, but today's BenefitsLink newsletter includes a just-published IRS PLR that might be of interest: https://www.irs.gov/pub/irs-wd/201833012.pdf RatherBeGolfing 1 Link to comment Share on other sites More sharing options...
RatherBeGolfing Posted August 17, 2018 Share Posted August 17, 2018 The program the IRS commented on is pretty interesting... Current program matches elective deferrals on a payroll by payroll basis. An elective deferral of at least 2% of pay period comp triggers a 5% of pay period comp match, deposited each pay period. The proposed program allows a participant to enroll in the student loan benefit program. Under the program, a "student loan repayment nonelective contribution" of 5% of pay period comp will be if student loan repayment of at least 2% of pay period comp is made. the SLRNE will be deposited after the end of the year. Participants may also make elective deferrals during the year but can't cant get a match for a pay period s/he receives a SLRNE for. you can get both SLRNE and match but not for the same pay period. There is a last day condition on both the SLRNE and match while in the program, and the contributions are subject to vesting. The IRS determined that the proposal to amend the Plan to provide SLR nonelective contributions under the program will not violate the “contingent benefit” prohibition of section 401(k)(4)(A) and section 1.401(k)-1(e)(6). Link to comment Share on other sites More sharing options...
Peter Gulia Posted August 17, 2018 Share Posted August 17, 2018 The key to the analysis seems to be that a participant who elects into the student-loan structure is not precluded from elective deferrals. In practical effect, a participant chooses whether she prefer to get the employer's contribution in response to 401(k) deferrals or student-loan repayments. That a participant can get the employer's contribution either way lets a participant choose how to allocate her limited resources between retirement savings and student-loan repayment without fear of losing the "match" the employer provides. Peter Gulia PC Fiduciary Guidance Counsel Philadelphia, Pennsylvania 215-732-1552 Peter@FiduciaryGuidanceCounsel.com Link to comment Share on other sites More sharing options...
Recommended Posts
Create an account or sign in to comment
You need to be a member in order to leave a comment
Create an account
Sign up for a new account in our community. It's easy!
Register a new accountSign in
Already have an account? Sign in here.
Sign In Now