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Last week, Representatives Rodney Davis (R-IL), Jared Polis (D-CO), Scott Peters (D-CA) and Elise Stefanik (R-NY) introduced H.R. 795, a bipartisan bill that would expand Section 127 of the Internal Revenue Code to include student loan repayment.
Section 127 covers employer-provided tuition assistance, which is a popular employer-provided benefit that allows an employee to exclude from income up to $5,250 per year in assistance for any type of educational course at the certificate, undergraduate or graduate levels. Employers are not required to provide assistance under Section 127; however, if an employer chooses to do so, the benefit must be offered to all employees on a nondiscriminatory basis that does not favor the highly compensated. Efforts in the 114th Congress, and now in the 115th, have sought to expand this benefit to include student loan repayment.
Increasingly, individuals entering the labor market are facing startling amounts of student loan debt. Employers providing a student loan repayment benefit not only help to mitigate this challenge but also are able to recruit and retain top talent. According to SHRM's 2016 Employee Benefits research report, 4 percent of employers currently offer this benefit.
Expansion of Section 127 would allow employees and employers to exclude the cost of the benefit, up to $5,250 per year, from personal income and FICA taxes. Essentially, the tax treatment would encourage employers to assist with the financial burden of higher education, thus assisting their employees with tuition repayment. SHRM, along with the SHRM-led Coalition to Preserve Employer Provided Education Assistance, supports the legislation.
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