NAICU Washington Update

Bills Expanding Employer Education Assistance Introduced in Congress

October 24, 2019

Bipartisan legislation has been introduced in both the House and Senate that would expand the benefits under Internal Revenue Code Sec. 127 that currently allow employers to offer employees up to $5,250 in tax-free tuition assistance. 
One legislative proposal includes a significant increase in the amount of assistance employers can provide, to $11,500, while another expands the benefit to allow employees to use the assistance for tuition or student loan repayment.
The Sec. 127 benefit was a temporary benefit first enacted in 1978, and finally made permanent in 2012.  Since the benefit was made permanent, efforts have been underway by the Sec. 127 Coalition to expand and improve the benefit.  The Sec. 127 Coalition is a broad-based coalition of nearly 100 groups representing business, labor, and education, dedicated to preserving and expanding Section 127.  NAICU co-chairs the coalition, along with the Society for Human Resource Management.
When Sec. 127 was first enacted over 40 years ago, the benefit was set at the $5,250 amount with the intent that it would allow employers to cover the entire cost of college for an employee.  The annual amount has not been increased since.  Legislation was recently introduced, however, by Representatives Danny Davis (D-IL) and Jason Smith (R-MO) to more than double the annual benefit amount from $5,250 to $11,500 annually, and the amount would be indexed for inflation.
Additional legislation was introduced earlier this year by Representatives Scott Peters (D-CA) and Rodney Davis (R-IL) to expand the benefit to allow employees to use the assistance for either tuition or student loan repayment.  Senate companion legislation was introduced by Senators John Thune (R-SD) and Mark Warner (D-VA).
Combined, these bills would greatly expand tax-free educational assistance for working students. Employer assistance is an important tool for addressing cost and debt, and it helps employers attract the best employees and build an educated workforce to continue to position the U.S. economy to compete globally.

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