Not a Member? Get access to HR news and resources that you can trust.
We asked HR professionals to tell us about their time in HR. Here are their stories.
Is your employee handbook keeping up with the changing world of work? With SHRM's Employee Handbook Builder get peace of mind that your handbook is up-to-date.
Instructor-led guidance for your SHRM-CP/SHRM-SCP exam, no travel or time out of the office required.
#SHRM18 will expand your perspective – on your organization, on your career, and on the way you approach HR. Join us in Chicago June 17-20, 2018
Proposal to more than double tax-free reimbursements ignored
[Editor's note: Unlike the House of Representatives version of tax reform, the Senate proposal would preserve Section 127 tuition reimbursements.]
Tax reform, in its
current version unveiled by the House of Representatives Nov. 2, would repeal tax-free employer tuition reimbursements, even as employers are calling for these payments to be increased, according to Kathleen Coulombe, Society for Human Resource Management (SHRM) senior advisor, government relations.
Doing away with Section 127 of the Internal Revenue Code, which provides for the tuition reimbursements, is a "mind-boggling" proposal, said Pat Castelli, CFO of Niles Bolton Associates, an architectural firm in Alexandria, Va., and Atlanta. "How can you have a mortgage interest deduction and not allow this?"
Section 127 currently allows an employee to exclude from taxable income up to $5,250 per year in employer-provided educational assistance for undergraduate or graduate studies or certificate work, as may be required in health care. The benefit covers tuition, fees, books, supplies and equipment. Employers are not required to provide assistance under Section 127.
Congress should expand the Section 127 reimbursements, recommended Sen. Jeff Flake, R-Ariz., and Rep. Jason Smith, R-Mo., in an Oct. 25 proposal that would raise the employer tuition reimbursement amount to $11,500 and index it to inflation. For nearly 40 years, even as the cost of tuition has skyrocketed, the amount employers can give to employees, without being taxed as income, has remained the same.
[SHRM members-only HR Q&A:
Tax Treatment: How does The Economic Growth and Tax Relief Reconciliation Act affect educational assistance programs?]
SHRM strongly believes that providing tuition assistance is a key component to a comprehensive benefits package that helps HR recruit and retain top talent, Coulombe said.
But the current amount—$2,625 per semester—isn't enough, Castelli noted. Tuition "can run much higher," which leaves employees with a lot of costs to bear.
Even for employers that already reimburse students above $5,250 per year, an increase in the tax-free amount "would have a positive impact on the administration of the program, avoiding the processing of taxable wages for the amounts over $5,250," noted Michelle Voisinet Caylor, director of human resources with Modern Technology Solutions Inc. (MTSI) in Alexandria, Va. MTSI reimburses up to a maximum of $10,000 per calendar year for continuing education. The courses must be job-related and through an accredited program for the tuition to be reimbursable.
Student Loan Reimbursement
In addition to wanting to be able to continue to reimburse students' tuition, employers would like tax-free student loan reimbursement,
which was proposed earlier this year.
"We have started a student loan contribution program at our firm, and I have heard from many that they wish it was a tax-free program," Castelli said. "Student debt is a life-changing problem and one we all need to acknowledge. Our employees are affected by the financial strain of the debt they must pay off. They have difficulty renting apartments, buying cars and most certainly buying homes."
Tax reform has a long way to go before becoming law, with consideration by the Senate still on the horizon. It's possible that Section 127 will not be eliminated, and could possibly be expanded as legislation progresses, according to Coulombe, who is spearheading SHRM advocacy efforts to preserve the popular employer-provided benefit.
Was this article useful? SHRM offers thousands of tools, templates and other exclusive member benefits, including compliance updates, sample policies, HR expert advice, education discounts, a growing online member community and much more. Join/Renew Now and let SHRM help you work smarter.
You have successfully saved this page as a bookmark.
Please confirm that you want to proceed with deleting bookmark.
You have successfully removed bookmark.
Please log in as a SHRM member before saving bookmarks.
Your session has expired. Please log in again before saving bookmarks.
Please purchase a SHRM membership before saving bookmarks.
An error has occurred
Recommended for you
Choose from dozens of free webcasts on the most timely HR topics.
SHRM’s HR Vendor Directory contains over 3,200 companies