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Educational Assistance Benefits

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American employers may soon be able to count on an important tax benefit -- permanently. U.S. Representatives Sander Levin (D-MI) and Phil English (R-PA), senior members of the House Ways & Means Committee, introduced the "Employee Educational Assistance Act" to make permanent a tax break for employers who pay certain education costs for employees. The bill (H.R. 3418) was introduced on August 3rd.

The tax provision (under section 127 of the Internal Revenue Code) has allowed employers to pay for tuition, books and fees up to $5,250 for undergraduate- and graduate-level education for employees on a tax-free basis since 1978. During the past 29 years, Section 127 has been extended nine times and is currently set to expire in 2010. This has caused some confusion for employers seeking to re-work payroll systems or change their training programs.

According to a recent SHRM "Question of the Week," 65 percent of employees, in the past year, used Section 127 to pursue degrees in Science, Technology Engineering or Math (STEM) fields, areas in which many U.S. employers are currently experiencing a shortage. Since 71 percent of SHRM members responding to the survey indicated that their organizations offer section 127 benefits, this tax provision plays a critical role in strengthening U.S. competitiveness.

As introduced, the "Employee Educational Assistance Act" boasts a bipartisan list of 36 cosponsors including nine members of the House Ways & Means Committee, which has jurisdiction of the legislation. The bill is also widely supported by a diverse coalition of higher education organizations, labor groups and business interests.

Questions about the bill should be directed to Nancy Hammer, SHRM's Manager of Tax and Benefits.


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