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Employer-Provided Educational Assistance

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On Friday, December 17, 2010, President Barack Obama signed into law the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 (H.R. 4853), which was one of a handful of measures which passed the 111th Congress during its lame-duck session.

This legislation extends many provisions within the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA) for a two-year period.  Its passage prevented a series of tax increases from taking effect on January 1, 2011.

Below is a brief listing of some of the law’s provisions of particular interest to SHRM members, HR professionals and employers:

Section 127, Employer-Provided Education Assistance – Allows employees to use up to $5,250 in employer-provided tuition assistance – tax-free – for graduate-, undergraduate- or certificate-level education and training.  NOTE: This was a priority issue for SHRM and the Coalition to Preserve Employer-Provided Education Assistance, which SHRM led.

  • Deductible Education Expenses – Allows assistance from certain scholarship programs to be excluded from income.  Qualified tuition reductions for certain education provided to employees are also excludable from income.
  • Federal Unemployment Benefits – Extends benefits for an additional 13 months, through December 2011, and maintains the current cap of 99 weeks of total benefits.
  • Employer-Provided Child Care Credit – Allows a credit of 25 percent for child care expenses and 10 percent for child care resources (not totaling more than $150,000) for acquiring, constructing, rehabilitating or expanding property that is used for a child care facility.
  • “Making Work Pay” Credit – Terminates the credit and replaces it with a one-year payroll tax reduction that will reduce the employee share of the FICA payroll tax by almost one-third, by 2 percentage points – down to 4.2 percent.  For IRS guidance regarding the 2011 payroll tax table, please click HERE.
  • Expansion of Employer-Provided Mass Transit and Parking Benefits – Allows employers to reimburse employees for transit-related fringe benefits up to $230 per month.
  • Employer Wage Credit for Active Military Reservists – Provides eligible small business employers (employers with 50 or fewer employees) with a credit against the taxpayer's income tax liability for a taxable year in an amount equal to 20 percent of the sum of differential wage payments to activated military reservists.
  • Employer Adoption Tax Credit – Allows employers to exclude from income adoption expenses paid to an employee.  The EGTRRA increases the credit from $5,000 ($6,000 for a special needs child) to $10,000, and provides a $10,000 income exclusion for employer-assistance programs.  The Patient Protection and Affordable Care Act of 2010 extends these benefits to 2011 and makes the credit refundable.
  • Work Opportunity Tax Credit (WOTC) – Allows employers to claim a work opportunity tax credit equal to 40 percent of the first $6,000 of wages paid to new hires of one of nine targeted groups.  These groups include members of families receiving benefits under the Temporary Assistance to Needy Families (TANF) program, qualified veterans, designated community residents and others.

SHRM greatly appreciates the huge outpouring of support member’s provided in generating support for the extension of Section 127 benefits. 

This support consisted of more than 500 SHRM members conducting face-to-face meetings on Capitol Hill with legislators and their staffs in 2010, nearly 10,000 letters to Congress in support of Section 127, and a collection of YouTube videos by members (available HERE) sharing how they or their fellow employees have benefited from this provision of the tax code.  Thanks for sharing the HR perspective on this important workplace benefit!

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