Offer Educational Assistance Benefits to Help Attract and Retain Employees SPARK Blog

Because the IRS considers this a working condition fringe benefit, it’s tax-deductible for businesses and tax-free for employees. Look to see if your employee can learn their desired skills through online training courses or other low-cost options if paying for a degree is outside your business’s budget. However, Congress temporarily amended the tax code for the period beginning March 27, 2020 and ending December 31, 2025. During this time, employers can use section 127 education assistance programs to pay for the principal or interest on an employee’s qualified student loans up to the $5,250 limit. An increasing number of people in the workforce today have student loan debt with interest and are searching for help managing it.

Exempt benefits with financial limitations

New employees are immediately eligible for group term life insurance for coverage equal to two times annual salary, rounded up to nearest thousand dollars, with a maximum benefit of $1,000,000. NORC provides tuition reimbursement up to $5,250 per calendar year for undergraduate and graduate courses after 6 months of eligible employment. NORC also offers employees an opportunity to enroll in professional certification courses, seminars, conferences and continuing education courses as the professional development budget permits. If your company offers any type of student loan repayment assistance program, you need to be taking advantage of it. Currently, Congress is considering changing student loan repayment assistance to be a tax-free benefit . If Congress were to move these benefits to being tax-free, you could likely see a much larger number of companies offering this benefit.

For example, health insurance firm Cigna not only recouped the costs of its tuition program but also saved $1.29 for every dollar spent thanks to lower turnover and reduced recruiting costs. According to the Society for Human Resource Management’s 2015 Employee Benefits Survey Report, just 3 percent of companies offer company-provided student loan repayment. Adopting an educational assistance program now could help differentiate your business and engage your workforce. Automatic Data Processing, Inc. offers several options for retirement benefits and other amenities to promote employee well-being. Automatic Data Processing, Inc. also offers group life insurance, short-term disability insurance for accidents or illness, long-term disability insurance, and death benefits, which cover certain causes of death. Yes, it’s an extra step, but it’s the only way you’ll know precisely what the plan will cost you and your employees so you can accurately compare the costs with those of competing plan providers.

You can typically ask a recruiter or HR representative during an interview process or once you get an offer. Employer-paid tuition reimbursement benefits and policies vary depending on the company. But basically, tuition reimbursement is when an employer pays a percentage or flat amount per year of tuition—and sometimes other costs—for an employee seeking further education. Comprehensive information on imputed income is available in IRS Publication 15-B, Employer’s Tax Guide to Fringe Benefits.

get tuition assistance

Our all-in-one PEO solution doesn’t just handle benefits administration tasks for you, it also covers plan design, carrier relations, open enrollment and even employee communications. Which is why it’s crucial that you learn how to work with your small business’ budget to ensure you’re able to offer benefits that will make your company desirable to the most sought-after candidates. Keep in mind that an employer is not required to provide retirement or group health plans.

Managing the Business Side: Financial Considerations and Record-Keepin

Ideally, your corporate environment is appealing enough to encourage employees to invest in a career, but you’re always better served by written policy. Millions of Americans have student loans and are looking for help getting out of debt. By meeting this need with a student loan repayment program, employers can retain valued employees and attract new talent. Helping alleviate financial burdens on employees may also improve workforce productivity. Support your staff’s educational efforts by paying for their work-related courses.

FAQs: Imputed income tax implications

ADP is a leading provider of Human Capital Management (HCM) solutions, and it is a trusted partner to many of the world’s largest organizations. After all, when you know a company is invested in you, it enhances not only your loyalty to them, but also your job performance and your job satisfaction rates. However, offering this benefit, even if it’s modified to fit a small budget, shows a strong commitment to employees and sends a message that you’re invested in their long-term potential. Support your staff’s educational efforts by paying for their work-related courses.

However, for employees who took the “traditional” path of graduating high school, going to college, and then entered the workforce, tuition reimbursement plans miss the mark. I think many companies don’t realize that they may actually be frustrating employees because they can see this program exists, but are sitting with their loans and can’t take advantage of it. A growing trend in the last few years has been for employers to offer student loan repayment assistance to employees as a benefit. Unlike tuition reimbursement , student loan repayment assistance is a relatively new concept, but one that is gaining traction.

• Employers can help address these issues and differentiate themselves from competitors by offering student loan repayment benefits.
• Highly compensated employees may also be excluded from some imputed income exemptions, particularly if a fringe benefit favors them and isn’t available on the same terms to other employees.
• It offers practical information concerning the subject matter and is provided with the understanding that ADP is not rendering legal or tax advice or other professional services.
• If your employees are paying for their own education, you can create an educational assistance plan to reimburse them for their educational costs — even if their studies aren’t job-related.
• Unique benefits, on the other hand, consist of education assistance, paid parental leave, telecommuting and more.

Employees at businesses with defined benefit pension plans collect adp tuition reimbursement a fixed sum when they retire. With a defined contribution pension plan, companies help workers save and invest for retirement. ADP offers many types of employee retirement plans, including traditional 401(k), individual or solo 401(k), SIMPLE IRA, safe harbor 401(k) and Roth 401(k). It helps manage payroll, benefits, taxes, compliance, and other HR tasks, and provides a range of solutions for small, mid-sized and large businesses.

As such, employees may have to pay taxes (federal income tax and Medicare and Social Security taxes) on any fringe benefits they receive from their employer that are not tax exempt. Offering a student loan repayment benefit can help employers attract top talent and retain existing employees, and more employers are catching on. Data from the Society for Human Resources Management (SHRM) shows that the number of companies offering student loan repayment doubled from 4 percent to 8 percent between 2018 and 2019. Once you’ve selected what type of assistance plan best suits your talent retention goals, you need to create solid policy. It’s also critical to safeguard this information, since you might choose to reject one application but approve another — educational details must be treated with the same care as any other HR records. This article is intended to be used as a starting point in analyzing employer student loan repayment and is not a comprehensive resource of requirements.

And for employers, the amount paid or reimbursed for an employee’s education expenses is a deductible business expense. As an added bonus, if the educational expenses qualify, employees may be able to exclude the payment or reimbursement from gross income as what is known as a working condition fringe benefit. Working condition benefits are services or property provided to employees so they can perform their jobs.

Think of it like this — offering academic assistance is a good starting point and top employees want to know the business has a vested interest in their well-being and advancement. If given money to attend school or time off work and then effectively ignored, chances are they’ll develop a healthy resentment and start looking for new opportunities. Scheduled follow-up ensures both employer and employee are honoring their ends of the bargain and provides invaluable feedback to improve your assistance offering over time. If your employees are paying for their own education, you can create an educational assistance plan to reimburse them for their educational costs — even if their studies aren’t job-related. Businesses can offer most employees up to $5,250 tax-free per employee per year, according to the U.S.

• Other fringe benefits may be tax exempt depending on the circumstances in each case.
• We are committed to the ongoing personal and professional development of our colleagues.
• Sites like Straighterline.com, Lynda.com, eCornell.com, and CodeAcademy.com provide affordable ways for people to receive training and college credits for less money than a brick-and-mortar university would charge.
• Everyone knows about offering 401 matching plans, free food and flextime, but few businesses offer educational benefits to their staff.
• New employees are immediately eligible for group health and/or dental insurance.

Helping your staff with their educational costs doesn’t have to be difficult or expensive. Here are four ways to offer educational assistance benefits that show them you support their educational endeavors. A benefit provider is an organization that charges premiums in exchange for health care coverage or other services. From the employee’s perspective, the group benefits provider is often the employer.

Take your organization to the next level with practical tools and resources that can help you work smarter.

They are excluded from imputed earnings as long as the property or service would be considered a business expense or depreciation expense deduction if the employee had paid for it. The employee must meet any substantiation requirements that apply to the deduction. In contrast, Section 127 education assistance programs can cover an employer’s current education costs pretax up to $5,250 per individual, per year. Student loan repayment by employers is a benefit that helps employees reduce their student loan debt. Programs may either be a direct repayment made by the employer or discretionary, which allows employees to choose how benefit dollars are applied to their student loans. But benefits change over time, so make sure you confirm that you have the most up-to-date information.