Understanding Reimbursement Via Qualified Education Assistance Programs

Under an education assistance program (EAP), an employer is permitted to reimburse employees for up to $5,250 (the amount will be indexed for inflation after 2026) in qualified education expenses each year. Qualified expenses include tuition, fees, books and supplies/equipment (but only if those items cannot be kept after the course is complete). Many employers wonder if they are required to reimburse all qualifying expenses if they offer an EAP. The answer is no, employers are free to impose restrictions. For example, an employer can require that the employee earn a certain minimum grade or remain employed with the employer for a certain period of time following course completion. Employers can also limit reimbursement to certain types of courses (e.g., courses at accredited two-year or four-year colleges). Employers can require employees to obtain the employer's approval as a condition for reimbursement (for example, if they wish to limit reimbursement to courses that are relevant to the business). However, employees must be given reasonable notice about any restrictions and those restrictions cannot discriminate in favor of highly-compensated employees. For more information on the rules governing EAPs, visit Tax Facts Online. Read More: Link to Q8889.