News Archive

"Education cannot relate to a sport, game, or hobby, unless it involves the employer's business or is required as part of the student's degree program. Meals, transportation, and lodging cannot be reimbursed. Supplies and equipment (other than textbooks) can only be reimbursed if they cannot be kept after the course is completed."  MORE >>

"Seventy percent of employers have defined key performance indicators for those investments, but just 13% conduct standardized recurring reporting ... More than half of organizations surveyed spend at least $1 million annually on education benefits, while nearly one in four invests $5 million or more."  MORE >>

"The One Big Beautiful Bill Act ... contains sweeping changes to student loans. These changes will impact how families and students pay for their educations, and how employers can help individuals repay their loans upon entering the work force. [This column] will discuss some of the Act's changes to federal student loans and explore ways employers can attract and retain top-tier talent."  MORE >>

"While the updates do not fundamentally change the Section 127 framework, they reinforce the importance of careful plan design and documentation, particularly as student loan repayment benefits continue to be a key attraction and retention tool."  MORE >>

"The 2024 FAQs referenced a fixed annual exclusion limit of $5,250 per employee for educational assistance. The 2026 FAQs provide that, beginning in 2027, the exclusion limit will be indexed for inflation.... Employers should consider updating their programs and administrative systems to account for annual increases beginning in 2027."  MORE >>

"The updated guidance, reformed by the One Big Beautiful Bill, gives employers a timely opportunity to modernize Section 127 programs, including by revising plan documents, expanding or formalizing student loan repayment features, and reassessing compliance with notice and nondiscrimination requirements."  MORE >>

"If enacted, the legislation [HR 8314] would allow employers to establish a 'Qualified Benefit Options Plan,' permitting current and former employees to direct their employer contributions to benefit programs that meet their specific needs. The contributions to eligible tax-favored employer-provided benefit programs would be allocated without triggering taxable income solely due to that choice. The available benefits would include: [1] Nonelective contributions to a retirement plan; [2] Health savings account or health reimbursement arrangement contributions; [3] Qualified educational assistance benefits (including student loan repayments); [4] 'Other benefits which are excluded from gross income' under the Internal Revenue Code."  MORE >>

"Two themes emerge from the 2026 update: statutory changes tied to the OBBBA, most notably the permanent treatment of student loan repayment assistance and future inflation indexing of the exclusion limit, and related IRS clarifications that frame those benefits in a more forward-looking and flexible way."  MORE >>

"Accountable plans remain the most tax-efficient way for nonprofits to reimburse employee business expenses. When properly structured and implemented, these plans allow reimbursements to be excluded from employees' taxable income and save payroll taxes for the organization.... Qualifying expenses commonly include business-related travel, meals, lodging, transportation, professional dues, continuing education, and necessary tools or supplies. Home office expenses may qualify in limited circumstances, but only when they're directly tied to the employer's business needs and not personal use."  MORE >>

"The new FAQs make three substantive changes compared to the FAQs released in 2024: [1] Cost-of-living adjustment to the $5,250 exclusion ... [2] Permanent extension of qualified education loan payments ... [3] Educator expense itemized deduction (starting 2026)."  MORE >>

"The Revised FAQ now provides that ... the annual limit ... will be adjusted for increases in the cost of living for taxable years beginning after 2026.... Revised Q1 provides that an employer 'must' tell employees whether there is a Section 127 educational assistance program where they work.... Revised Q8 asks whether 'officers, shareholders, self-employed individuals, highly compensated employees and owners' can receive educational assistance, and answers affirmatively, noting that the program must still satisfy the non-discrimination requirements of Section 127 [.]"  MORE >>

"The 2026 FAQs clarify that, unlike other expenses, an employee may incur Student Loan expenses prior to employment.... The 2026 FAQs revised language from the 2024 FAQs to make clear that the employer 'must' (rather than 'can') inform the employees about the program and its terms. The 2026 FAQs reflect the OBBBA indexing provision, beginning in 2027."  MORE >>

"These frequently asked questions supersede earlier FAQs that were posted in FS-2024-22. This fact sheet [FS-2026-10] updates frequently asked questions related to educational assistance programs under section 127 of the Internal Revenue Code (a section 127 educational assistance program). The FAQ revisions are as follows: [1] Revised background description; [2] Revised throughout for One, Big, Beautiful Bill Act amendments and minor clarifications and renumbering; [3] Modified sample plan."  MORE >>

"PLR 202434006 permitted an election between a defined contribution plan, an HRA, an HSA, and student loan payments under a qualified educational assistance program. The [OPTIONS Act (HR 8314)] goes beyond that and allows an election for any benefits that are excluded under the Code. Presumably, this would include benefits such as a dependent care assistance program and a Trump Account."  MORE >>

6 pages; Mar. 2026. "The [IRS] is providing [this] sample plan to assist employers in establishing a qualified educational assistance program under section 127 of the Internal Revenue Code. The sample plan is intended to satisfy the requirements of section 127 of the Code and the underlying Treasury Regulations. An employer, in its discretion, may modify the sample plan and include additional plan provisions, provided that the requirements of section 127 of the Code and the underlying Treasury Regulations continue to be satisfied."  MORE >>

"Beginning June 30, 2027, all noncompetition covenants are void and unenforceable unless they fall under an exception to the law.... The statute also takes an indirect swipe at training repayment agreement provisions (TRAPs), stay or pay provisions, and incentive clawbacks and forfeitures."  MORE >>

"Educational assistance programs under Code Section 127 currently can be used to help employees repay certain student loans, though certain restrictions apply.... The loan repayment provision, originally set to expire at the end of 2025 ... is now permanent and applies to payments made after March 27, 2020."  MORE >>

"[E]ffective January 1, 2026, California law significantly restricts employers' ability to include claw-back or repayment provisions in employee agreements, including provisions tied to tuition reimbursement.... New York's Trapped at Work Act similarly restricts the use of employment promissory notes, requiring repayment of training costs. A recently enacted amendment to the law ... delays enforcement and created a narrow exception allowing for tuition repayment agreements, provided strict statutory conditions are met."  MORE >>

"Many employers include a brief description of their educational assistance program in their employee handbook and consider the issue addressed. While handbooks are a useful communication tool, they are not sufficient for tax purposes. Under Internal Revenue Code Section 127, educational assistance programs must be established and maintained pursuant to a separate written plan document in order for benefits to be excluded from employees’ taxable income."  MORE >>

"Employers that are considering whether to fund these Accounts may find that there are more effective ways of providing compensation and promoting savings. Employees may be more interested in placing money into a more flexible savings option, such as a retirement savings account, Health Savings Account or 529 account."  MORE >>

"Employer-sponsored education programs offer a high return in the areas like retention and professional growth, but new evidence shows how their influence on knowledge sharing can positively impact every employee in the workplace.... 80% of employees participating in education programs through work feel more confident helping others on their team, 54% said they have shared the new skills they've learned and 71% say they are more productive."  MORE >>

"Here are some of the main ways OBBBA's tax cuts and spending reform will affect healthcare, retirement, education and more, and what benefit leaders should prioritize as open enrollment approaches."  MORE >>

"To make your organization's educational assistance program more valuable, amend it to make clear that the program's $5,250 benefit is indexed and includes qualified student loan payments."  MORE >>

"The provision was set to expire on Dec. 31, 2025, but employers can now make the benefit a permanent part of their educational assistance programs."  MORE >>

"[P]lan sponsors should consider whether offering first dollar coverage for telehealth coverage or a DPC Arrangement meets their organization's employee benefits strategies. Plan sponsors that want to offer loan assistance through their qualified education assistance plan will need to amend their plan ... Plan sponsors may always want to evaluate how the increased [DCAP] limit may impact nondiscrimination testing."  MORE >>