STATE OF CONNECTICUT
THE STATE COMPTROLLER
55 ELM STREET
HARTFORD, CONNECTICUT 06106-1775
MEMORANDUM NO. 2006-38
November 29, 2006
TO THE HEADS OF ALL STATE AGENCIES
|ATTENTION:||Chief Administrative and Fiscal Officers, Business Managers, and Payroll and Personnel Officers|
|SUBJECT:||Exclusion for Employer-Provided Educational Assistance|
The purpose of this memorandum is to review the exclusion for employer-provided educational assistance.
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 was made permanent for undergraduate courses and was expanded to include graduate courses that began 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 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 Earnings Code TU1 - Non-Reportable Tuition.
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 Earnings Code TU2 - Reportable Tuition.
C. Union Funded - Tuition Reimbursements
Payment requests for reimbursement of tuition and other professional development costs from union funds must be processed by submitting a form CO-101 to the Comptroller's Fiscal Policy Division, Tuition Reimbursement Unit.
Please direct questions to the Office of the State Comptroller as follows:
Union Funded Tuition Payments: Fiscal Policy Division, (860) 702-3334;
Payroll Procedures: Payroll Services Division, (860) 702-3463;
Memorandum Interpretation: Fiscal Policy Division, (860) 702-3440.
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