Thursday, November 8, 2018

What’s Happening in the Retirement Market?

Rob Peter to Pay Paul?

Typically this idiom has had a negative connotation, but the Internal Revenue Service’s (IRS) August 17 Private Letter Ruling approving the amendment of Abbott Lab’s 401(k) to include a student loan repayment benefit implies there might be circumstances when it’s not only ok “to take from one source to give to another,” but financially savvy.

The IRS gave its blessing to Abbott Lab’s making non-elective contributions to the 401(k) plan based on an employee’s total student loan repayments made outside the plan. These employer contributions would be in lieu of the matching contributions that would otherwise be made to the plan had the employee made elective contributions. However, the employer may provide a year end true-up match to ensure that if there are pay periods where the employee fails to make student loan repayments, but opts to make elective contributions during the same period, the employee would be eligible to receive a true-up matching contribution.