Tuition Aid Repayment

cwildrick

Our company is looking at its current Tuition Aid Policy to determine if it is in alignment with industry standards and legally binding as it relates to reimbursement should the employee voluntarily separate from the company within a specified time period after completing the program/course work.

Under IRS regulations, an employer can pay up to $5,250/year in tuition aid and it is non-taxable to the employee.

Lets say the company reimburses an employee $10,000 in one year for the employee’s tuition. Of that $10,000, $5,250 is non-taxable to both the employee and employer, and $4,750 is taxable income to the employee. Under the policy, it states if the employee separates from the company within two years from completing the course/program, he/she is responsible for reimbursing the company 100% of the $10,000.

Is the company entitled to reimbursement of $10,000? Or, is it only entitled to reimbursement of $4,750
($10,000 - $5,250 = $4,750)?

Can an employer legally collect tuition reimbursement monies paid to an employee that is classified as non-taxable (up to the first $5,250) if the employee signed a Tuition Reimbursement Agreement and separates from the company within the repayment period?

NaeNae55

What difference does the tax status make to the employer? If the employee signs an agreement to repay under certain conditions then they have to repay. The employee can then refile their taxes based on having to repay the $4,750 once it is done, and not on the $5,250 (pretty much a reversal of how they received it).

charidelli

Tuition reimbursement is one of the only things that can be deducted from a terming employee's last check. The employer does have the right to be paid back the amount, but if they ex-employee doesn't do it voluntarily you may need to pursue litigation.

Have you heard of using the IRS Section 132 Working Condition Benefit rules for tuition reimbursements? This is an alternative to the Section 127