Many employers see the value in this type of fringe benefit as a way to boost morale, retain employees and create a skilled labor pool. According to the Internal Revenue Service, employers can also reduce the amount of employment taxes a company pays every year by taking advantage of the “educational assistance program” exclusion. Implementing a tuition reimbursement policy that satisfies the IRS’s criteria allows employers to exclude up to $5,250 of reimbursements per year from the W-2 of each employee.
To qualify, your company’s tuition reimbursement policy must be a written plan that outlines all eligibility requirements, does not favor highly compensated employees and does not provide more than 5 percent of the annual reimbursements to owners. Moreover, employees must have notice of the program but cannot have the option of taking alternative taxable benefits in lieu of a tuition reimbursement.
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