COMPTROLLER'S SEAL STATE OF CONNECTICUT

STATE OF CONNECTICUT

NANCY WYMAN
COMPTROLLER

OFFICE OF THE STATE COMPTROLLER
55 ELM STREET
HARTFORD, CONNECTICUT 06106-1775

MARK OJAKIAN
DEPUTY COMPTROLLER

MEMORANDUM NO. 2001-63 

November 6, 2001 

TO THE HEADS OF ALL STATE AGENCIES 

ATTENTION: Chief Administrative and Fiscal Officers, Business Managers, and Payroll and Personnel Officers
SUBJECT: Extension of Exclusion for Employer-Provided Educational Assistance

I. PURPOSE

The purpose of this memorandum is to provide notification of an extension and expansion of Section 127 of the Internal Revenue Code (IRC) for employer-provided educational assistance up to $5,250 per year. This memorandum will outline how tuition reimbursements for state employees should be processed. This memorandum replaces all previous memoranda on the subject of employer-provided educational assistance including Memoranda Nos. 2000-23 and 2001-20.

II. AUTHORITY

The Economic Growth and Tax Relief Reconciliation Act of 2001, Public Law 107-16, contains a section affecting the exclusion for employer-provided educational assistance. The exclusion is made permanent for undergraduate courses and is expanded to include graduate courses that begin after December 31, 2001.

III. EDUCATIONAL ASSISTANCE PROGRAMS - SECTION 127 IRC

Employee benefits under an educational assistance program are not included in the employee's gross income. The exclusion from gross income is limited to the first $5,250 of educational assistance per calendar year. Educational assistance benefits over $5,250 are generally not excludable unless the educational assistance payments qualify as a working condition fringe benefit.

IV. DETERMINATION OF REPORTABILITY UNDER SECTION 132 IRC

Educational assistance exceeding the $5,250 limit may be excludable under IRC Section 132, "Exclusion of Certain Fringe Benefits from Gross Income." Please use the following guidelines when determining reportability under IRC Section 132.
 
A. Non-Reportable Courses
 
If the course is not required for the employee's current position, or the course maintains or improves skills needed in the employee's current position, it is non-reportable.
 
This includes refresher courses, courses on current developments, and academic or vocational courses.
 
NOTE: Non-reportable reimbursements are not included with the employee's wages and are not subject to Federal or State withholding tax.
 
B. Reportable Courses 
 
Courses taken to meet the minimum educational requirements for an employee's current position are reportable.
 
Courses that are a part of a program of study that can qualify for a new trade or business are reportable, even if the individual is not seeking a new job.
 
Review courses to prepare for the bar examination or the certified public accountant (CPA) examination are reportable, because these courses may qualify an employee for a new profession.
 
NOTE: Reportable tuition reimbursements are included with employee's wages and are subject to taxes.

V. REQUESTS FOR PAYMENT

The following procedures are to be used when processing employee tuition reimbursement payments:
A. Non-Reportable Tuition Reimbursements - Agency Funds
 
Payments that meet the criteria outlined in Section IV, A are non-reportable. These tuition payments must be submitted on form CO-17XP-PR and processed through the payroll system using D/OE Code 1T - Non-Reportable.
 
B. Reportable Tuition Reimbursements - Agency Funds
 
Payments that meet the criteria outlined in Section IV, B are reportable, and the processing of these tuition payments, using agency funds, is through the payroll system. Form CO-17XP-PR must be completed using D/OE Code 2G-Reportable.
 
C. Fund 9916 - Reportable Tuition Reimbursements
 
Payment requests for reimbursement of tuition and other professional development costs from fund 9916, meeting the criteria outlined in Section IV, B, must be processed by submitting a form CO-17XP-PR to the Comptroller's Management Services Division - Support Services Unit.
 
D. Fund 9916 - Non-Reportable Tuition Reimbursements
 
Non-reportable tuition reimbursements continue to be submitted on form CO-17XP to the Comptroller's Management Services Division Support Services Unit, for processing.

VI. GENERAL

Please direct questions to the Office of the State Comptroller as follows:
 
Fund 9916 Tuition Payments: Management Services Division, (860) 702-3327;
 
Payroll Procedures: Payroll Services Division, (860) 702-3463;
 
Memorandum Interpretation: Policy Services Division, (860) 702-3440.

 

NANCY WYMAN
STATE COMPTROLLER

NW:CH

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