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Lecture Employee benefits and retirement planning - Chapter 55: Educational assistance plans

This chapter covers education-related assistance for improving job skills and for non-job-related educational expenses. Advantages and disadvantages are mentioned, but the major coverage is on the tax implications. The tax implications section focuses on requirements for allowing a deduction or reimbursement for different types of expenses. | What is it? A plan that pays or reimburses employees for expenses incurred in: Education that improves job-related skills Non-job related educational programs Education for children or dependents of employees Copyright 2009, The National Underwriter Company Advantages Employers benefit when employees gain skills through education Properly structured job-related educational benefits are not taxable income to employees Copyright 2009, The National Underwriter Company Disadvantages Broad program may simply train employee for job with another employer Educational benefits beyond certain limits are taxable as compensation to the employee Copyright 2009, The National Underwriter Company Tax Implications Individual can deduct job-related educational expenses IF education: Maintains or improves skill required in individual’s employment Is expressly required by individual’s employer as condition of keeping the individual's job Other types of education are not deductible Copyright 2009, The National Underwriter Company Tax Implications Travel expenses not deductible as job-related educational expenses Employer reimbursements to employees for job-related educational expenses are deductible by employer as compensation Plan can be designed in such a way that it is tax- free Copyright 2009, The National Underwriter Company Tax Implications Tax benefits exist for those incurring educational expenses: Itemize deduction as employee business expense Tuition and fees at eligible post-secondary education institution are deductible even if do not itemize Hope Scholarship and Lifetime Learning tax credits Copyright 2009, The National Underwriter Company Tax Implications IRS sets specific criteria for “qualified educational assistance plans”; currently, broad range of educational reimbursements allowed on tax-free basis Employer reimbursements for education of employee’s children or dependents are: Taxable income to employee Deductible as compensation by employer | What is it? A plan that pays or reimburses employees for expenses incurred in: Education that improves job-related skills Non-job related educational programs Education for children or dependents of employees Copyright 2009, The National Underwriter Company Advantages Employers benefit when employees gain skills through education Properly structured job-related educational benefits are not taxable income to employees Copyright 2009, The National Underwriter Company Disadvantages Broad program may simply train employee for job with another employer Educational benefits beyond certain limits are taxable as compensation to the employee Copyright 2009, The National Underwriter Company Tax Implications Individual can deduct job-related educational expenses IF education: Maintains or improves skill required in individual’s employment Is expressly required by individual’s employer as condition of keeping the individual's job Other types of education are not deductible .