Section 127 of the U.S. tax code allows an employee to exclude from their gross income up to $5, 250 per year in employer provided tuition assistance for undergraduate and graduate level courses. Section 127 was established in 1978 and has been extended by Congress eight times, is set to expire on December 31. 2010.
The Society of Human Resource Management (SHRM) Government Affair sent a November 16, 2010 alert to SHRM members encouraging them to urge their Members of Congress to support making Section 127 a permanent part of the U.S. Tax Code. The alert cited research finding in support of making Section 127 permanent:
“Employer provided education assistance helps employees better themselves without increased tax liability, and it helps employers by encouraging them to invest in their workforce. According to a study by SHRM and the National Association of Independent Colleges and Universities, the number of people receiving the benefit more than doubled between 1992 and 2007, from 431,500 to 913,100. Additionally, this benefit helps build and maintain an increasingly skilled workforce and positions our nation to remain competitive in the global economy. Almost 20 percent of recipients are pursuing science, technology, engineering and mathematics (STEM) degrees. A 2009 SHRM poll showed that 76 percent of organizations offered education assistance for undergraduate or graduate study orboth.” (SHRM, HR Voice, November 16 2010).
In addition to SHRM many other professional organizations to include the National Association of Graduate and Professional Students (NAGPS) are advocating for the continuation of Section 127. Education assistance is among the most popular employee benefits and supports the organization’s recruitment, retention, and competitiveness goals. Tuition Assistance was cited as a popular perk in many of the companies on Baltimore Business Journal’s Book of Lists 2010, “Best places to work in the Baltimore area.” The GI education assistance program has been one of the military’s most successful recruitment and retention programs. The societal benefit of this education assistance program is an American success story. Generations of service members have been able to achieve the American dream as s result of this program.
While Congress will have to make tough choices in trimming the budget, cutting Section 127 Employee Provided Assistance, will hurt or reduce the ability of employers to offer tuition assistance to its employees. This will impact recruitment, retention, and the ability of individuals and organizations to compete in the increasing competitive global market place.