IRS Provides Guidance to Plan Sponsors Regarding Long-Term, Part-Time Employee Rules, Student Loan Matching Contributions, and Disaster Relief Notices Amid Devasting Events
IRS Provides 403(b) Plan Sponsors with Guidance on Long-Term, Part-Time Employee Rules
IRS Notice 2024-73 provides guidance for ERISA-covered 403(b) plans related to the long-term, part-time (LTPT) coverage rules introduced by SECURE Act 1.0 and updated by SECURE Act 2.0. An ERISA 403(b) plan is one where the employer provides contributions or in some other manner controls the plan. Non-ERISA 403(b) plans as well as governmental and nonelecting church plans are not subject to the LTPT rules.
Among other items, the notice clarified an ERISA 403(b) plan:
Must give any LTPT-qualified employee the ability to make salary deferrals;
May retain an exclusion for part-time employees (e.g., employees who normally work less than 20 hours per week, who do not qualify as ERISA LTPT employees);
May exclude student employees from making elective deferrals; and
May exclude LTPT employees when determining whether the plan satisfies nondiscrimination requirements for matching contributions.
The IRS plans to issue additional guidance for LTPT rules, including proposed regulations for ERISA 403(b) plans. The notice also states the now proposed LTPT regulations for 401(k) plans, when finalized, will apply no earlier than to plan years beginning on or after January 1, 2026.
IRS Notice 2024-63 Gives Guidance on Student Loan Matching Contributions
On August 19, 2024, the IRS released Notice 2024-63, providing guidance under SECURE Act 2.0 on an employee’s Qualified Student Loan Payment (QSLP) matching contributions in 401(k), 403(b), governmental 457(b) and savings incentive match plans for employees (SIMPLE) IRA plans. Among other items, the guidance, written in Q&A format, covers:
QSLP qualification requirements,
Payment certification requirements,
Actual deferral percentage (ADP) testing,
Timing of payments, and
Tax year attribution.
The notice applies for plan years beginning after December 31, 2024. For plan years beginning prior to January 1, 2025, plan sponsors may rely on a good faith, reasonable interpretation of Section 110 of SECURE Act 2.0. Further guidance in the form of regulations and a model amendment is expected.
IRS Issues Numerous Disaster Relief Notices in Wake of Devastating Events
Taxpayers and plan sponsors need to be aware of the many disaster relief news releases issued by the IRS in the past weeks and months. These releases often provide individuals and business owners more time to file tax returns, make tax payments and complete required reporting such as filing the various versions of IRS Form 5500, Annual Return/Report of Employee Benefits Plan. A cumulative list of these disaster relief notices can be found here Tax Relief in Disaster Situations.
For example, News Release FL-2024-10, issued October 11, 2024, grants tax relief for individuals and businesses in parts of Florida that were affected by Hurricane Milton that began on October 5, 2024. These taxpayers now have until May 1, 2025, to file various federal individual and business tax returns and make tax payments. The notice explains in more detail the specific actions that are affected. This relief also includes the filing of Form 5500 series returns, which are postponed for the affected areas through May 1, 2025, according to the notice.
Sources
(2025, January 15). Tax relief in disaster situations. IRS. https://www.irs.gov/newsroom/tax-relief-in-disaster-situations
(2024, October 10). IRS announces tax relief for victims of Milton; various deadlines postponed to May 1, 2025 in all of Florida. IRS. https://www.irs.gov/newsroom/irs-announces-tax-relief-for-victims-of-milton-various-deadlines-postponed-to-may-1-2025-in-all-of-florida
(n.d.). Additional Guidance with Respect to Long-Term, Part-Time Employees, Including Guidance Regarding Application of Section 403(b)(12) to Long-Term, Part-Time Employees under Section 403(b) Plans. IRS. https://www.irs.gov/pub/irs-drop/n-24-73.pdf
(n.d.). Guidance Under Section 110 of the SECURE 2.0 Act with Respect to Matching Contributions Made on Account of Qualified Student Loan Payments. IRS. https://www.irs.gov/pub/irs-drop/n-24-63.pdf