Bills to Expand Tax Benefits for Employer-Provided Education Assistance Introduced

Bi-partisan legislation that would increase the annual amount of tax-free education assistance employers can provide to employees has been introduced in both the House of Representatives and Senate. The bills would increase the annual amount that employees can use for either tuition assistance or student loan repayment from $5,250 to $12,000.

The Upskilling and Retraining Assistance Act, introduced by Senators Maggie Hassan (D-NH), Todd Young (R-IN), Catherine Cortez Masto (D-NV), and Tim Scott (R-SC), proposes to increase the annual tax-free benefit to $12,000 for two years and is designed as a temporary boost for workforce retraining. Companion legislation has been introduced in the House by Representatives Randy Feenstra (R-IA) and Danny Davis (D-IL). Reps. Feenstra and Davis also introduced the Upward Mobility Act that would increase the annual tax-free benefit amount to $12,000 permanently but only for undergraduate course work.

The annual tax-free assistance amount, contained under Sec. 127 of the Internal Revenue Code, has not been increased in almost 40 years. Sec. 127 was created as a temporary tax benefit in 1978 to allow employers to cover practically the entire cost of an employee’s education at that time. After numerous extensions as the benefit grew in popularity, it was finally made permanent in 2012. During the pandemic, as part of the CARES Act, the benefit was expanded to allow the annual assistance to be used for either education assistance or student loan repayment.

NAICU co-chairs the Section 127 Coalition, which is comprised of groups representing higher education, business, and labor dedicated to preserving and expanding this benefit. The coalition has been successful in not only preserving the benefit from being eliminated in tax reform legislation in 2017, but for expanding it to allow student loan repayment. The coalition is now working with the House and Senate on efforts to increase the annual amount and extend the student loan expansion beyond its 2025 expiration.

For more information, please contact:
Karin Johns