We wanted to bring to your attention an essential update from the Internal Revenue Service (IRS) regarding educational assistance programs that can assist employees in paying off their student loans. Under federal law, this initiative allows employers with educational assistance programs to use them to benefit their employees’ student loan obligations.
Here is a summary of the key points from the IRS article:
Educational Assistance Programs for Student Loans:
Employers with educational assistance programs can now utilize them to help employees pay off their student loans. This provision will continue to be available until December 31, 2025.
Traditional Usage:
Historically, educational assistance programs have been used to cover expenses such as books, equipment, supplies, fees, tuition, and other educational costs for employees. However, this has been expanded to include payments towards the principal and interest on an employee’s qualified education loans, whether made directly to the lender or the employee.
Tax-Free Benefits:
Tax-free benefits provided under an educational assistance program are limited to $5,250 per employee per calendar year. Amounts exceeding this limit are typically considered taxable as wages.
Attracting and Retaining Employees:
In a competitive labor market, offering valuable fringe benefits like educational assistance programs can be a strategic move for employers to attract and retain skilled workers.
Program Requirements:
Employers must establish educational assistance programs in writing and ensure they do not discriminate in favor of highly compensated employees.
IRS Webinar:
To help employers and employees better understand this opportunity, the IRS is hosting a free 75-minute webinar on Thursday, September 14, at 2 p.m. ET. The webinar will include a question-and-answer session. To register or obtain more information, visit the Webinars for Small Businesses page on IRS.gov.
IRS Communication:
The IRS plans to share further information about this provision through e-newsletters that target small businesses, tax-exempt organizations, and tax professionals. They will also use IRS social media channels for outreach.
We recommend considering the benefits of implementing or utilizing educational assistance programs in your organization to support your employees and enhance your ability to attract and retain top talent.
If you have any questions or need assistance understanding the specifics of this educational assistance program, please don’t hesitate to contact us. We are here to help you navigate these opportunities effectively.
