Educational Assistance Programs

Jackie

For years our company has sponsored a program where an employee can get reimbursed for classes taken at college or voc/tech schools. Our plan specifies the class is to have a direct benefit to the job. In 1993 there was a legal evaluation of our program to determine if a 5500 was needed. The evaluation determined that because the plan specified that the classes were to be limited to those relating to the employee's job, it was not necessary. Some employees were denied inclusion of their classes because they were related to the "arts" rather than business.

Since then, HR management & General management people have changed, and I have been promoted to HR Supervisor. The sum of my training is the PHR Certification class and about 4 years assisting the previous HR Manager. I know what has been done in the past, but not always why.

When the General Manager decided to allow employees to take any class that might be required for an Associate's or Bachelor's degree, I did not recognize that this might create a situation where we would need to file a 5500. I fear this change has put us in a precarious spot because we haven't filed.

Where can I find information that will explain clearly if we do or do not have to file this report now that we have changed the interpretation of our plan?

Margaret Morford

Jackie,

I don't want to add to your stress level, but those non-job related classes are probably not deductible as a business expense for your organization and are probably taxable as income to the employee. You need to check with your accountant on that issue as well.

Margaret Morford
theHRedge
615-371-8200
[email]mmorford@mleesmith.com[/email]
[url]http://www.thehredge.net[/url]

Jackie

Thanks for tip - My stress level was already up - that's why I needed advise on where to find out more before we did a deeper hole by ignoring it.

Jackie

Lori B

There are 2 primary ways to offer these programs: one is to require the coursework to be directly job related. These expenses are always deductible for the company and no 5500 is required. The other is to set up a plan under 127 of the Internal Revenue Code. These types of plans allow non-job related education without the tax bite to the ee, but it is capped each year to around something like $5200. 127 plans must be in writing and are supposed to file 5500s. Note: that 127 plans are subject to "expiring" legislation which means that Congress tinkers with the rules every couple of years each time they renew it.
I haven't researched this issue in awhile, but these are just general parameters if you are looking for a starting point.