The Employer Participation in Repayment Act allows employers to contribute up to $5,250 tax-free to employees’ student loans annually through 2025.
U.S. Sens. Mark R. Warner of Virginia and John Thune of South Dakota are encouraging the IRS to more effectively promote educational assistance programs to help alleviate the burden of student loan payments for Americans.
“This provision within section 127 is a win-win for employers and employees, as it provides a pathway towards student loan debt relief for borrowers and provides employers with another option to recruit and retain talent necessary to grow their businesses,” the senators wrote.
Warner questioned IRS Commissioner Danny Werfel in April 2023 about his organization’s outreach efforts regarding benefits available to borrowers. Werfel committed to devoting significant efforts to making taxpayers aware of the benefits. However, little progress has been made since to make employers and employees aware of the programs which would greatly reduce stress of monthly payments for borrowers and help employees retain qualified candidates.
“During your testimony before the Senate Finance Committee on April 19, 2023, you stated that outreach on section 127, including ensuring that taxpayers are aware of such benefits, is a top priority of the agency,” the senators continued. “However, we have found that resources on educational assistance programs are difficult to locate on the IRS website. Additionally, within these hard-to-find and limited resources, the expansion of the program to include student loan debt as a qualifying tax-free educational expense is not highlighted as new information and the eligibility window is deeply buried. Furthermore, online IRS webinars have failed to adequately promote employer-provided educational assistance programs and call attention to student loan debt payments as a qualifying expense.”
The senators requested the IRS take a series of steps to better promote these programs:
- The IRS host and publish webinars on employer-provided educational assistance programs;
- The IRS publish new and robust resources to aide employers seeking to take advantage of section 127 benefits;
- And the IRS communicate expanded section 127 benefits and new resources to employers and employees, including, but not limited to, transmitting this information through IRS e-newsletters for business owners.
Section 127 of the IRS Code was created in 1978 and made permanent in 2012. The section provides a tax benefit allowing employers to contribute up to $5,250 in tax-free annual assistance to employees pursuing continued education. In 2019, with broad bipartisan support, Sens. Warner and Thune introduced the Employer Participation in Repayment Act, legislation that extends this tax-free benefit to employees’ existing student loans. The senators played a key role in extending this provision through 2025 as part of the 2021 government spending package.