Consolidated Appropriations Act, 2021 (CAA), signed into legislation by President Donald Trump on Dec. 27 extends for 5 years COVID-19 aid that enables employer-provided student loan reimbursement as a tax-free profit to workers below Section 127 of the Internal Revenue Code. Through 2025, employers can proceed to contribute of as much as $5,250 per worker yearly towards eligible schooling bills, like tuition or student loan help, with out elevating the worker’s gross taxable earnings.
The $5,250 restrict is the quantity
that employers might at present contribute for tuition help and associated bills, reminiscent of charges and books, below Section 127 of the tax code. Through 2025, it turns into the mixed restrict for loan reimbursement help or different education-assistance funds workers obtain, until the restrict—which is ready by statute and doesn’t alter yearly for inflation—is raised by Congress.
Tuition reimbursement help “allows employers to address a chief concern of the current workforce with a targeted and equitable employee benefit,” stated Laurel Taylor, CEO of FutureFuel.io, a supplier of software program for managing student debt reimbursement advantages.
According to Scott Thompson, CEO of Tuition.io, a advantages platform for worker student loan contributions, “providing a tax subsidy for employer student loan repayment doesn’t just benefit individual workers; it will help reduce a major drag on the overall economy as we recover from the COVID-19 shock.”
Advocates of tax-advantaged loan reimbursement advantages are anticipated to foyer Congress to make this variation everlasting.
Around 8 % of organizations are at present offering student loan reimbursement as a profit, in response to a 2019 survey of Society for Human Resource Management (SHRM) members.
Extending CARES Act Relief
The Coronavirus Aid, Relief and Economic Security (CARES) Act, signed into legislation in March 2020, quickly allowed employers to supply as much as $5,250 in tax-exempt student loan reimbursement contributions or tuition help from March 27, 2020, by means of Dec. 31, 2020. The CAA extends these provisions by means of Dec. 31, 2025.
“Although the CARES Act modification was a welcome change, the invoice
didn’t entice numerous consideration from employers,” wrote Alexander Mattingly, an attorney in the Cincinnati office of law firm Graydon, in a blog post. “Not solely was the motivation short-term, however employers with out a program in place must undertake a proper schooling help program for a 2020 profit, and lots of employers couldn’t afford to supply an additional incentive in a 12 months with a world pandemic.”
The five-year extension provided in the CAA “makes the downsides to the CARES Act provision extra palatable and exhibits that Congress is critical about offering options to the student loan debt disaster.”
According to Kate Winget, head of participant engagement and experience for Morgan Stanley at Work, which includes benefit administrator Gradifi by E*TRADE, “It is a big win that this laws has been prolonged, however our work is much from over. As the adoption of this profit grows, we should proceed our push to make this essential tax therapy everlasting.”
“SHRM has long-advocated for the growth of employer-provided schooling help to incorporate student loan reimbursement as a profit and is happy to see the profit prolonged by means of 2025,” said Chatrane Birbal, vice president for public policy at SHRM. “This profit will present some aid to workers who’re at present repaying student loan debt and likewise offers employers extra flexibility within the design of profit choices for recruitment and retention functions.”
Related SHRM Articles:
How the CARES Act Changes Health, Retirement and Student Loan Benefits,
SHRM Online, March 2020
Converting PTO Funds to Student Loan Relief Is a Timely Benefit,
SHRM Online, August 2020
The Business Case for Employee Student Loan Repayment Programs,
All Things Work, January 2020