Date: November 13, 2002
Bulletin No. 353
|Subject||Educational Assistance Benefits/Agency Time Entry|
|Purpose||This bulletin updates Payroll Bulletin 286 and Payroll Bulletin 292 in relation to the processing and taxation of educational assistance benefits for 2002.|
|Affected Employees||Employees who received a taxable educational assistance benefit through the State's Central Accounting System from a qualified educational assistance program provided by the employer that exceeds the $5,250 threshold during the 2002 calendar year.|
In general, gross income of an employee
does not include amounts paid or expenses incurred by the employer for
educational assistance to the employee if the assistance is furnished pursuant
to a qualified educational assistance program.
A qualified program may benefit only the employees. A program that provides benefits to spouses or dependents of employees is not a qualified program. Benefits paid from an unqualified program are fully taxable.
Beginning January 1, 2002, the exclusion of up to $5,250 per year of educational assistance benefits received from a qualified program provided by an employer applies to both graduate and undergraduate courses whether the course is job-related or not.
Benefits from a qualified educational assistance program that exceed the $5,250 threshold are generally taxable unless they can be excluded as a "working condition fringe benefit".
|Tax Rules Chart||
The following chart recaps the tax rules as
As noted, taxable benefits above
the $5,250 threshold will be subject to wage reporting and withholding.
Reimbursement for courses processed through
the Central Accounting System must be reported to the payroll system in order to
effectuate the withholding of taxes.
Taxable amounts for 2002 must be entered into the payroll system to affect an employee's 2002 W-2. Agencies may enter these transactions immediately. Taxable amounts must be entered no later than Payroll Period 18 Lag and Payroll Period 19 Current for both Institution and Administration.
Agencies may enter the taxable value into the payroll system on the TIME ENTRY panel or report the transaction on the MISCELLANEOUS PAYMENTS FILE. Specific reporting procedures are provided below:
Time Entry Instructions
On the Time Entry panel, enter the following information:
Misc. Payments File Instructions
|Communication to Affected Employees||
Attached to this Bulletin is a separate
communication for employees to explain the tax rules governing educational
assistance benefits and describe how the educational assistance amounts will be
displayed on the pay stub. Agencies are strongly encouraged to:
|Questions||Questions regarding this bulletin may be directed to the Payroll Deductions mailbox.|