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Date: November 9, 2009

Bulletin Number: 936

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Subject

Educational Assistance Benefits

Purpose

To provide agencies with instructions to apply the educational assistance benefit to employee taxable earnings and ensure that all educational assistance benefits are included when determining the taxable amount for tax year 2009.

Affected Employees

Employees who receive qualified educational assistance benefits that exceed the $5,250 threshold for the 2009 calendar year through the agency (paid by voucher through the NYS Central Accounting System) and/or M/C, PEF or CSEA.

Tax Rules

Per IRS Publication 15-B Employer’s Tax Guide to Fringe Benefits, the first $5,250 of educational assistance provided to an employee under an educational assistance program is excluded from taxable wages.  Amounts in excess or $5,250 are subject to Federal, State, Local, Social Security and Medicare taxes.

A qualified program may benefit only the employee.  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.

Most New York State programs are qualified programs.  Please see IRS Publication 15-B for further information.

OSC Actions

OSC will create Control D-report NPAY758 (Educational Assistance Reported to OSC).  A bulletin board message will be issued when the report is available.

Agency Actions

Agencies must review the Control-D report and identify employees whose combined educational assistance benefits exceed $5,250.  The combined educational assistance benefit includes the amount shown on the Control-D report added to any additional educational assistance benefits paid to the employee by the agency.  The amount exceeding $5,250 is considered the ‘taxable amount’ and must be reported in PayServ through Time Entry or reported through the agency Miscellaneous File.

 

To report the taxable amount through Time Entry, use the Earn Code EDA and enter the following information into the Time Entry page:

Earnings Begin Date: Enter the last date of the pay period     
Earnings End Date: Enter the last date of the pay period
Earnings Code Amount: Enter EDA
 
Enter the taxable amount (amount
that exceeds $5,250)

For Administration pay cycle agencies, these transactions must be entered no later than Pay Period 18 Lag (November 26 through December 9, 2009) and Pay Period 19 Current (December 10 through December 23, 2009).

For Institution pay cycle agencies, these transactions must be entered in PayServ no later than Pay Period 19 Lag (December 3 through December 16, 2009) and Pay period 20 Current (December 17 through December 30, 2009).

Communication to Affected Employees

OSC has prepared a letter explaining the tax rules governing educational assistance benefits and describing how the educational assistance amount will be displayed on the employee’s paycheck stub or direct deposit advice statement.

Agencies are strongly encouraged to:

  • Provide this letter to affected employees prior to the processing of these payments.  Advance notification will give employees time to prepare for the additional tax withholding.
  • Include additional information with this letter that identifies the specific dates on which the withholding for educational assistance benefits will occur.

Questions Questions may be e-mailed to the Tax and Compliance mailbox.