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February 21, 2011
Tax Relief Law Extends Education Assistance Provision

Tax relief legislation passed late last year extends through 2012 a tax code provision that allows employees to continue excluding employer-provided education assistance from their gross income.

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The exclusion of up to $5,250 per year applies to both undergraduate and graduate courses and had been scheduled to expire at the end of 2010.

Tuition Assistance Survey
That news was likely a relief to the many employees who receive tuition reimbursement from their employers. According to the Benefits USA 2010/2011 Survey, nearly 85% of companies offer tuition reimbursement to their employees.

Compdata Surveys ( found that 45.3% of organizations offer tuition reimbursement to all employees, while others limit this benefit to certain segments of their workforce. Specifically, the survey found that 38.2% of management employees are offered tuition reimbursement by their employers. This benefit is also available to technical or professional and administrative employees at a rate of 37.9% and 37.4%, respectively. In addition, Compdata Surveys reported that about 33% of hourly employees are offered tuition reimbursement.

“The economic state of the past couple of years has amplified individuals’ awareness of the importance of education,” said Amy Kaminski, director of marketing for Compdata Surveys. “Companies offering tuition reimbursement are not only providing a valuable benefit to employees, but they are creating a more valuable workforce, giving them a competitive edge.”

What Is the Criteria?
Understandably, employers make such an investment with the understanding that employees meet certain conditions to be eligible for tuition reimbursement.

For example, Compdata Surveys found that the majority of companies (63.4%) stipulate that an employee who received tuition reimbursement must continue working for them—for an average of 15 months after being reimbursed.

Another common criterion is that employees must take certain courses to meet reimbursement guidelines. In fact, more than 86% of survey respondents indicated that they have such a requirement.

How Much Is Offered?
About 27% of survey respondents do not cap the amount that they will reimburse employees for eligible tuition expenses, according to the Benefits USA Survey. While most organizations do impose annual maximums, the amount varies by region.

For example, Northeastern companies offer the highest average tuition reimbursement maximum ($4,183 per year), while the Southeast has the next highest at $3,871.

Organizations in the West report an average annual reimbursement maximum of $3,731, compared to $3,716 in the South Central region of the country. Survey participants in the Midwest report an average reimbursement maximum of $3,624.

Related aricle:

New Federal Tax Package Highlights for Employers

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