Retaining employees, and attracting new ones, has always been at the forefront of employer’s minds, but never more so than right now. An extension of the student loan repayment plan for employers is one attractive way to stabilize your workforce.
The CARES Act (Coronavirus Aid, Relief, and Economic Security Act) extended tax-free employer sponsored student loan repayment through 2025. This means that employers can give each employee up to $5,250 of non-taxable money to pay off student loans per year. The amount the employer contributes is deductible by the employer and it is not income to the employee. It is the best situation for both employer and employee!
There are guidelines put forth by the IRS, such as who is a qualifying employee, so if your business is thinking of creating a program it must abide by these rules. Additionally, the $5,250 is the total per year, per employee, for all school-based payments. If your business offers other educational benefits, you must make sure the total costs per employee per year are not above that amount, or it will become taxable income for that employee.
Other considerations for creating a student loan repayment program for your company include who qualifies, at what time in their employment will they qualify, how long to offer the program to employees, and will there be a lifetime maximum to this benefit.
If you’re thinking of creating a program for student loan repayment for your business, it’s a smart idea to start a pilot program now. This non-taxable program is set to end in 2025, however proponents of the program hope to extend it, considering the benefits to employers and employees alike.
~ Authored by Leah Thomas, Paralegal