Private Letter Ruling Makes Headlines Regarding Student Loan Payments


In a Private Letter Ruling (PLR) earlier this year, the IRS allowed a company (subsequently self-identified as Abbott Labs) to make non-elective contributions to their plan based on student loan repayments. The ruling was reported by Forbes magazine and gained national attention this summer.

The IRS issues PLRs to address specific requests from taxpayers and plan sponsors. The PLR applies only to the applicant and cannot be relied on by any other plan sponsors.

The mounting student loan debt crisis has created interest among many plan sponsors to apply the PLR to their plans. While the PLR did resolve some issues that would arise from student loan payments as a contribution basis, the plan in question was a custom plan amended specifically to allow for these contributions. The overwhelming majority of retirement plans are established on pre-approved prototype documents, and student loan repayments would not be an allowable basis for allocating employer contributions.

Hopefully, this important issue will be further addressed by the IRS or through legislation. We will provide an update of any new developments.

For questions or more information, please contact Richard Green at rgreen@windes.com or (844) 252-7337.

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