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April 2018  Volume 16, Number 4        

health benefits

Tuition Assistance for a Better Future

Tuition assistance not only benefits your employees, it helps your company.

Tuition assistance is an employer-provided employee benefit. Employers pay all or part of an employee’s cost to attend college or university classes. More than 60 percent of employers currently offer tuition assistance, according to EdAssist’s Annual Review of Employer Tuition Assistance Programs. That translates to almost one million students currently receiving some type of employer tuition support.

Employers have discovered that tuition assistance can be financially beneficial for their companies. Accenture conducted a study of Cigna’s tuition assistance program and found that Cigna got back $1 and saved another $1.29 for every $1 it spent.

Tuition assistance also helps recruit and retain employees. In the Cigna study, Accenture found that employees who participated were 10 percent more likely to be promoted; and eight percent more likely to stay with the company. The additional training they get helps employees expand their on-the-job knowledge and skills and fosters an environment supporting employee education.

The popularity of tuition assistance has increased lately because of increasing higher education costs and the necessity of a post-secondary degree for many important positions. For example, a student could spend $100,000 or more to earn an MBA.

How it Works

Under section 127 of the tax code, the IRS allows an employer to offer up to $5,250 per year in tuition assistance -- per employee -- and deduct it as a business expense.

Employees who switch jobs and receive tuition assistance from more than one employer are not eligible for additional educational assistance beyond the cumulative $5,250 limit.

Another benefit for employees is that tuition assistance is excluded from their income — meaning they pay lower taxes.

The funds must be used for a degree program or courses related to the employer’s business. Excluded courses include those focusing on sports, games and hobbies. Employees can use the funds for tuition, school fees, textbooks, lab fees, supplies and equipment. They cannot be used for transportation, lodging or meals. Employers, however, can pay a mileage reimbursement.

Employees’ spouses or dependents are not eligible for tuition assistance. The benefit must be made available for all employees and may not favor highly compensated employees. For instance, no more than five percent of the benefits paid may go to shareholders or anyone who owns more than five percent of the company stock.

If you decide to offer tuition assistance, you can pay the benefit to employees as soon as they register for a course. Or, you can require them to fill out paperwork to be paid after they complete the course. You also can require employees to earn a C or better in the courses. At Cigna, employees can chose any college they want to attend, but they get a discount for going to one of the 35 Cigna partner colleges.

To ensure the company receives the benefits of its employees’ enhanced skills, many employers ask that employees sign an agreement that they will pay back the tuition assistance if they leave the organization within a period of time, typically two to five years.

To find out more about adding a Tuition assistance option to your benefits program, please contact us.

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In this issue:

This Just In ... Future Uncertain for Wellness Program Incentive Rules

Don’t Let a Flu Epidemic Take Your Business Down

Tuition Assistance for a Better Future

Making a 401(k) Plan a Reality for Your Employees

A Partnership with an Eye to Better Health Care



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