Employers can provide employees up to $5,250 each calendar year in the form of tax favored tuition reimbursement. Internal Revenue Code Section 127 is the provision allowing this type of educational assistance program. The Coronavirus Aid, Relief, and Economic Security (CARES) Act temporarily expands educational assistance plans to student loan payments made after March 27, 2020, and prior to January 1, 2026.

The maximum amount available annually for student loan payments and educational expenses combined is $5,250. Educational assistance benefits under a Section 127 plan include payments for tuition, books, or a qualified education loan incurred by the employee for the education of the employee. Notably loan repayment is not available for family members.

The IRS has recently issued FAQ guidance addressing the applicability to student loan repayment. A written plan document is required for an educational assistance program. The guidance provides a sample plan for the employer’s use. If the employer wants to expand an existing program to include student loan reimbursement, the employer’s written educational assistance plan will need to be amended.

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