On [DATE], the Company established an Educational Assistance Plan (the Plan) pursuant Section 127 of the Internal Revenue Code (IRC) for the benefit of all full-time and part-time employees of the Company.
Employee qualification. Employees qualify for the Plan and earn the benefits when they work _____ hours or more during a calendar year. One year of qualification entitles the employee to one year of reimbursement. Time off for school does not count toward the _____ hours of work effort.
Employees may take courses of instruction during active employment, during an approved leave of absence, or after termination of employment. Benefits not used within _____ years of earning the benefits, or within _____ years of termination of service, are forfeited.
Pursuant to IRC §127(c)(4), the Plan prohibits payment of more than five percent (5%) of the total amounts paid or incurred by the Company for educational assistance during the year to the class of individuals who are shareholders or owners (or their spouses or dependents), each of whom (on any day of the calendar year) owns more than five percent (5%) of the stock, capital, or profits interest in the Company.
After application of the previous paragraph, the Plan then prohibits payments to those employees who are defined as highly compensated employees under IRC §414(q)(1)(B). Highly compensated employees are those whose compensation for the prior year exceeded certain inflation-adjusted thresholds. By way of example, for plan years beginning in 2021, a highly compensated employee is one whose compensation in 2020 exceeded $130,000 (IRS Notice 2020-79)
Maximum benefit. The maximum benefit provided by the Company for reimbursed educational expenses is equal to the maximum available under IRC §127. At the time the Plan was adopted, the maximum benefit was $5,250 per year under IRC §127(a)(2). Reimbursements under the Plan are tax-free fringe benefits to the Employee.
Right to terminate. The Company reserves the right to change or terminate the Plan without prior notice. If the Company ends the Plan, the Company will reimburse all courses in process prior to termination, but it will not reimburse any classes that begin after Plan termination and notification.
Plan funding. Pursuant to IRC §127(b)(5), the Company is not required to, nor will it, maintain a separate fund for the Plan. The Company shall pay reimbursements out of its general assets.
Alternative benefits. Pursuant to IRC §127(b)(4), the Plan prohibits the Company from offering Employees a choice between educational assistance or other compensation.
Reimbursed educational expenses. The Plan reimburses costs for tuition, fees, and books for college and university classes. The Plan does not reimburse costs for tools, supplies, meals, lodging, or transportation. Further, the Plan does not reimburse costs for any education that involves sports, games, or hobbies.
Pursuant to IRC §127(c)(1)(B), in the case of payments made before January 1, 2026 the Plan will also reimburse payments on any qualified education loan, including principal and interest (as defined in IRC §221(d)(1)) incurred by the employee for education of the employee. In the event that IRC §127(c)(1)(B) is changed by future legislation to allow educational assistance plans to reimburse payments of qualified education loans beyond December 31, 2025, then the Plan automatically conform to such change.
Employer notification. Employees must notify the Company in writing at the earliest opportunity of their expected reimbursed expenses to allow the employer to plan ahead of time for anticipated employee reimbursements.
Reimbursements. Upon completion of the courses, the Employee must provide an official transcript of grades and original receipts for all items for which the Employee seeks reimbursement. Further, the Company will not reimburse any amounts already reimbursed by any financial assistance, scholarship, or any other financial benefit derived from public or private programs. The participant must also attain a grade of “C” or better to qualify for benefits under the Plan. The Company shall reimburse the participant within 45 days of request and proper submission of the supporting documents.
In the case of student loan reimbursements, the Employee must provide monthly statements from the lender.
The Company has explained this Plan to me, an eligible employee, and I have read this Plan document. With this signature, I verify that I have read this Plan document and understand the Plan.
By:
Name
Signature Date
On behalf of the Company, I explained this Plan to the employee above. Further, I furnished the employee with a copy of the Plan and observed as he or she read the Plan. I hereby affix my signature in verification of these facts.
By:
Name
Signature Date
