As children and adults across the country organize book bags and pack lunch boxes now that back-to-school season is in full swing, education is certainly top of the mind. In fact, in addition to all the kids returning to school, many employers are likewise considering offering some sort of employee education assistance program to employees.
Many employers are offering these educational opportunities not only to benefit their workers, but also to aid in recruiting and retention efforts. Just last year, Amazon announced its plan to fund college tuition for its operations employees under a new initiative that launched at the beginning of this year. While Amazon's program involves paying for tuition and fees up front, many programs of this kind involve the use of tuition reimbursement, scholarships or even student loan repayment assistance.
When establishing an employee education assistance program, there are a number of legal and practical considerations to keep in mind. With every type of education-related benefit, employers must consider what limitations will be applicable. For example, employers should carefully consider whether all employees will be eligible for the benefit offered, or if the opportunity will be limited to certain groups of employees, such as management or supervisory personnel.
Companies should also be mindful of the intended tax structure and the legal requirements for compliance in conjunction with the consideration of which employees to offer the benefits to, as certain tax benefits are not available to employers who only offer these types of benefits to their highly compensated employees. While limiting the opportunity for employer-sponsored educational advancement to certain groups is certainly permitted, other tax laws offer favorable tax consequences to certain programs that do not favor highly compensated individuals, provided the employer structures the program in a way that complies with applicable federal regulations.
Tax laws can be complicated, and thoughtful discussion with a trusted legal or tax advisor can help ensure the plan results in the desired tax consequences.
Employers should also consider in advance what to do if an employee ceases employment, whether voluntarily or as a result of a termination for cause. An employer that offers tuition or educational loan advances should be mindful of the fact that in Oklahoma, these amounts may be recovered through a payroll deduction only if the parties have entered into a written, signed, and dated agreement authorizing as much. Without a legally enforceable payroll deduction agreement, an employer seeking recovery of a loan or advance will be stuck attempting to recover the funds from the former employee personally or through court proceedings.
Employers should also plan for what will happen if the employee ceases attendance in an educational program prior to completion of a degree or certificate, or sticks with the class but gets a non-passing grade. Obviously, with all these moving parts, it is imperative to distill all of the terms and conditions into a comprehensive tuition assistance and repayment agreement. This kind of document is best achieved with input from in-house or external legal counsel.
In a world where recruiting and retention of employees is becoming increasingly difficult, a well thought out employee education assistance program might help attract talent or improve the skillsets of current employees.
* This article first appeared in The Journal Record on August 19, 2022, and is reproduced with permission from the publisher.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.