Any restrictions, such as eligibility criteria and contribution limits, are usually imposed by the employers themselves. Examples of imputed income can typically be found under the “employer paid benefits” section of a pay stub. When applying this rule, employers must consider all the facts and circumstances available to them.

Dependent care flexible spending account (FSA) benefits

Automatic Data Processing, Inc. provides health, dental, and vision benefits. 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. Unique benefits, on the other hand, consist of education assistance, paid parental leave, telecommuting and more. Employers who succeed in keeping their employees engaged often find the right mix of both types of benefits. Small businesses can offer an attractive tuition reimbursement program to employees as long as it’s modified to fit their budget. While larger companies can meet the maximum offering of $5,250, which is the current IRS limit for tuition reimbursement, smaller companies can do something slightly different.

Hopefully more employers follow the companies below into offering student loan repayment assistance to their employees. According to the Society For Human Resource Management, about 3% of companies offered some type of assistance program to help employees pay down their student debt. Everyone knows about offering 401 matching plans, free food and flextime, but few businesses offer educational benefits to their staff. Headquartered in Phoenix, AZ, we have been developing and supporting human resource software since 2010. Our TuitionManager software, backed by top-notch support and industry-leading technology & security, is trusted to manage even the most complex tuition assistance programs.

Why should you consider paying your employees’ student loans?

• 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 you think of tuition reimbursement as not only an investment in your employees, but the success of your company overall, you will understand the all-encompassing value and potential it has.
• From a day-to-day activity perspective, our benefits team especially has seen a big change in the types of questions they’re now being asked.
• While larger companies can meet the maximum offering of $5,250, which is the current IRS limit for tuition reimbursement, smaller companies can do something slightly different.
• If your company offers any type of student loan repayment assistance program, you need to be taking advantage of it.
• In addition, lay out clear guidelines regarding non-completion and continued employment.

In contrast, Section 127 education assistance programs can cover an employer’s current education costs pretax up to $5,250 per individual, per year. 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. This rule only applies to certain benefits, such as no-additional-cost services, tuition reduction and adoption assistance. Whether a fringe benefit is treated as imputed tax income sometimes depends on the employee’s role in the company. For example, lodging on business premises is generally tax exempt if it’s done for the employer’s convenience and is a condition of employment.

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The payments may be sent to the financial institution that holds the loan or directly to the employee. If the employee has multiple loans, payments might first be applied to the loan with the largest balance or the loan closest to being fulfilled. According to the IRS, company scholarship programs can meet the requirements by ensuring that the scholarships awarded are for the main purpose of furthering the recipients’ education rather than compensating company employees. 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. As with anything, a small budget doesn’t have to mean you’re out of the game.

Student Loan Debt Under the Trump Administration: How Employers Can Support Their Workforce

• 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.
• It’s also critical to draft policy for educational leaves that allows workers to “borrow” time, which must be paid back via continued service over a set period.
• Automatic Data Processing, Inc. offers defined benefit pension plans and defined contribution pension plans.
• 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.
• According to the SBA, although you’ll pay employment taxes on the amount you contribute and it’s taxable to your employee, too, they’ll qualify to deduct student loan interest up to $2,500.
• According to the IRS, because they’re considered additional compensation, company scholarship programs are taxable expenditures unless they meet the qualifications for an individual grant and receive advance approval by the IRS.
• NORC provides tuition reimbursement up to $5,250 per calendar year for undergraduate and graduate courses after 6 months of eligible employment.

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 before sending staff off to school, decide exactly what you’re going to offer, understand how this assistance will be governed and create an ongoing assessment process to maximize your chances of retaining A-plus talent. 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.

Everyone knows about offering 401(k) matching plans, free food and flextime, but few businesses offer educational benefits to their staff. Filing a separate Form W-2 dedicated to fringe benefits and other benefit information is an available option. Total imputed income earned by an employee during the calendar year is reported in box 14 on the tax form. Working condition benefits are services or property provided to employees so they can perform their jobs.

Tuition reimbursement, meanwhile, sees employees taking classes at night or on the weekends with some of their educational expenses covered by the organization. Support your staff’s educational efforts by paying for their work-related courses. Because the IRS considers this a working condition fringe benefit, it’s tax-deductible for businesses and tax-free for employees. While paying for degree and certificate programs is a huge motivator, it can also be a huge expense. 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.

Your HR and finance teams will no longer need to manually enter benefit plan information and keep it updated across multiple systems. This helps reduce the risk of data entry errors and saves hours of valuable time. 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. Keep in mind that an employer is not required to provide retirement or group health plans. With an industry-leading mobile experience and seamless carrier integrations, you can help make it simpler and more convenient for your people to manage their benefits. Plus, you’ll have access to deep insights that can help you understand changing employee preferences and advanced technology to adapt accordingly.

What is imputed income?

Brochures describing the services offered are available from the Human Resources department. 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.

ADP shall not be liable for any direct, indirect, special, consequential, incidental, punitive or exemplary damages in connection with the use by you or anyone of the information provided herein. Company scholarships or grants that benefit your employees (or their children) can be a great incentive. According to the IRS, because they’re considered additional compensation, company scholarship programs are taxable expenditures unless they meet the qualifications for an individual grant and receive advance approval by the IRS.

What happens if employees leave after they’ve enjoyed the benefits of paid training? Summer is the only end-to-end student loan solution that saves employees an average of $40k and adp tuition reimbursement is proven to reduce turnover by 20%. Summer partners with employers to deliver tailored benefits that empower employees to save for education, better manage their student loans, find forgiveness options, and lower monthly payments. As a Certified B Corporation, Summer has partnered with leading employers, financial institutions, unions, and government leaders to generate over $1.5B in savings for borrowers.