IRS Issues FAQs on Educational Assistance Programs

July 02, 2024

On June 17, 2024, the IRS issued FAQs related to educational assistance programs under Section 127 of the IRC. Educational assistance programs are sponsored by employers and provide up to $5,250 in tax-free benefits to employees for certain qualified educational expenses. These expenses include items such as tuition, fees, books, supplies, equipment, etc. Principal or interest payments on qualified education loans made by the employer are also included if made after March 27, 2020, and before January 1, 2026. 

The FAQs address three main topics: 

1. General information: Questions 1 - 3 provide basic information to define an educational assistance program, describe tax-free educational assistance benefits, define total allowable assistance amounts, and outline written plan document requirements.
2. Qualified education loans: Questions 4 - 6 describe the requirements for a qualified education loan and how employers can make payments for employees’ qualified loans.
3. Miscellaneous information and exclusions: The final three questions (7 - 9) address the applicability of student debt as a qualified educational benefit, whether owners or shareholders are eligible participants, and any other exclusions that may be available.  

It is important to note that the FAQs are only intended to provide general guidance and cannot be relied upon by the IRS to resolve a case. Employers who sponsor, or are considering sponsoring, educational assistance programs should review the FAQs and work with their vendor or TPA as needed. 

Educational Assistance Program FAQs