Dear Small Business owner:
Do you happen to have an employee that’s about to start college? Maybe now is the time to start thinking about implementing an educational assistance program, or what’s commonly referred to as a tuition reimbursement program. These plans aren’t just for Fortune 500 companies, but they do require some thought and consideration before they can be implemented.
Here are some of the highlights these plans can offer small employers:
a. Exclusion from the employee’s income, and a tax deduction for the employer, up to $5,250 of tuition and related costs each year.
b. The ability to qualify reimbursements to employees. For example, participants must attain a certain grade in the course to qualify for the reimbursement.
c. Requires the employee to notify their employer, in writing, that they wish to participate in the plan.
d. Specify that only certain costs will be reimbursed, such as tuition, fees and books for college or university. This prohibits employees from requesting reimbursement for tools, supplies, meals, lodging or transportation.
Now there are some compliance matters that employers must adhere to under Sec. 127 of the Internal Revenue Code, however with the right planning, these conditions can be met.
It’s our opinion that these plans are a wonderful tool to help your small business retain talent, as well as provide an added benefit for your employees, all the while creating a tax deduction for your business.
If you think this type of plan may benefit your small business, feel free to reach out to us!