Section 2206 of the CARES Act amends IRC Section 127 to allow employer payments made before January 1, 2021 for student loans to be treated as educational assistance. An employer may provide education assistance to employees on a tax free basis up to a maximum exclusion of $5,250 annually. The provision is limited to payments made after March 27, 2020 until January 1, 2021.
The $5,250 annual maximum exclusion applies to both the new student loan repayment benefit, as well as other educational assistance (e.g. tuition, fees, books) provided by the employer under current law.
Check: Employers who wish to consider payments for employee’s student loans should ensure education assistance plan documentation is update to incorporate the payments into its plan administration and recordkeeping processes.
