1-6: Education assistance

Effective: July 1, 1994
Revised: October 15, 2025
Approved by: Van Christensen
References: IRS Publication 15-B, IRS Publication FS-2024-22 , Administrative Code 477-10-6

Purpose

This policy outlines the conditions and methods for providing education assistance to employees and is written to comply with IRS regulations and Administrative Code.

This policy does not address the specific way to make a payment or the system to use. See policy 1-1: Employee payments general policies and procedures.

Definitions

Agency – Any agency, board, bureau, commission, office, department, or other administrative subunit of the executive branch of state government.

Education assistance – Payments made by the employer for expenses incurred by or on behalf of eligible employees for education to any college, university, or vocational school.

Executive director – The executive leader of an agency.

Policy

A – Agencies may pay education assistance

1 – Employees may receive education assistance for some or all of the costs associated with educational pursuits that benefit the state through their agency’s education assistance program. Eligible assistance generally includes the cost of tuition, fees, books, and supplies.

2 – Education assistance can be in the form of administrative leave to attend classes.

3 – Education assistance does not include courses about sports, games, or hobbies (unless they’re related to an employee’s job or part of a degree program); meals, lodging, and transportation; and any tools (other than textbooks) an employee gets to keep after the completion of the course.

4 – Education assistance should not be used for repaying employees’ student loans or any other education costs incurred prior to their employment. Employees are hired and compensated based on their current merit, skills, and education.

B – Agencies must have a written plan

1 – Agencies must have a written plan outlining their education assistance program for education expenses to be paid. The plan is separate from this policy and is defined by the agency.

2 – Education assistance programs and policies must comply with the following rules:

2a – The program must define eligible employees and cannot favor highly compensated employees.

2b – The program must specify the type of education assistance that will be provided. See section A above.

2c – The employee’s education program must provide a benefit to the state.

2d – Employees must disclose any scholarships, subsidies, and grant monies received for the educational program and cannot receive any education assistance from the agency for costs covered by these amounts.

2e – Agencies must collect repayment of educational assistance from employees if:

the employee fails to successfully complete the required course work or educational requirements of a program; or
the employee leaves the agency within one year of completing the educational work.

2f – Education assistance may not exceed $5,250 per employee in any one calendar year unless approved in advance by the agency executive director. See section D for taxability.

C – Agencies pay according to their plan

1 – Agencies may reimburse employees prior to or upon successful completion as documented in their plan.

1a – If employees are reimbursed prior to successful completion of the coursework, agencies are responsible to ensure that evidence of successful completion of coursework is obtained and uploaded to the original expense.

2 – For all forms of payment, the following supporting documentation must be attached in the applicable system:

Itemized receipts for tuition, fees, books, and supplies
Report card that shows successful completion of education
Approval required by the agency’s education assistance plan

D – Agencies are responsible for determining taxability

1 – Education expenses paid without a plan are taxable.

2 – Annual education assistance of $5,250 or under is nontaxable.

3 – Annual assistance over $5,250 is taxable unless the education expenses are considered working condition fringe benefits.

4 – Education expenses are considered working condition fringe benefits and are not taxable when:

the education maintains or improves skills required by the employee’s current employment, trade, or business; or
the education is required by the employer or law to retain the employee’s current salary, status, or job; and
the education cannot qualify the employee for a new trade or business regardless of meeting the above requirements.

5 – Education expenses that are considered working condition fringe benefits do not have a limit for income exclusion, but these expenses must be documented as to how they meet the definition of working condition fringe benefits.

6 – Education expenses are not considered working condition fringe and are taxable when:

the education meets the minimum educational requirements of the employee’s current job; or
the education will qualify the employee for a new trade or business.

7 – Education expenses that qualify the employee for a new trade or business can be paid as part of an education assistance program but are limited to $5,250 to be non-taxable.

8 – Agency management is responsible for properly determining the taxability of education expenses.