Tuition Reimbursement Programs

One of the greatest incentives to come out of the Obama education push is the promotion of the tuition reimbursement program which compensates employers for putting employees through a college education, while continuing with their jobs. As far as perks go in a rapidly changing world and amongst an aging population, one would be hard pressed to find a greater employment benefit.

Employers offering continued education receive the benefit of a cutting edge, educated work force and gift their employees with invaluable resources for their jobs, and their futures. It is no wonder this initiative is proving so popular.

Company Benefits

Many larger companies have had reimbursement programs in place for a long time and some are partnered with educational institutions. For those that do not have a program in place the prospect may be scarier but the advantages to the employer far outweigh the risks and include:

  • Employee loyalty
  • Broader skill base
  • Modern skills
  • Tax breaks
  • Wider community relationships

Participating in the Program

Any employer can offer the program to any employee. To be eligible for government incentives and tax breaks certain criteria must be met. According to IRS regulations, employers can provide up to $5,250 to each employee per year on a tax-free basis. Any additional employer tuition assistance is taxed, so many employers stay within the IRS limit.

Expenses the government will not include in the program are:

  • Meals, lodging, or transportation.
  • Tools or supplies (other than textbooks) retained by the employee after completing the course of instruction.
  • Courses involving sports, games, or hobbies unless they:
    1. Have a reasonable relationship to the business of your employer, or
    2. Are required as part of a degree program.

Employers may also award scholarships to dependents of employees as long as the amounts do not require past, present or future teaching, research or other services by the student to the employer as a condition for receipt of the award. There is an exception to this rule if the teaching or research services are required of all degree candidates regardless of whether they are a recipient of a scholarship or fellowship. Only amounts paid for tuition and fees are excludable from income; amounts paid for a living stipend must still be reported as income. The student must be enrolled in a degree-seeking program.

Company Requirements

Most companies offering the program will want to set guidelines for employers. This may include which costs will be paid and when, what materials might be included and the length of time available to complete the course of study. Employees may need to maintain a grade point average throughout the course and may be responsible for some of the course costs. Employers may also want to tie an employer to the company for a certain period of time following course completion. This seems reasonable considering.

In addition to the benefits to employers and the obvious benefit of paid education for the employee, tuition reimbursement programs do not need to be included as work income on the employer’s income declaration. So basically, these are tax free earnings.

Based on 2003-04 NPSAS figures, approximately 41.5% of MBA students received employer tuition assistance, with an average amount of $4,448.70. The number of recipients was 127,600, and total amount received of $567,654,000. These figures are expected to be considerably higher in 2009/10.