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Date: November 16, 2011

Bulletin Number: 1105

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Subject

Educational Assistance Benefits

Purpose

To provide agencies with instructions for processing taxable educational assistance benefits for 2011.

Affected Employees

Employees who receive employer and/or union (M/C, PEF, and/or CSEA) paid qualified educational assistance benefits that exceed the $5,250 exclusion limit for calendar year 2011.

Legal Reference

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 of $5,250 must be reported and 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 a spouse or dependents of employees is not a qualified program. 

Benefits paid by a nonqualified program are fully taxable.

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

OSC Actions

OSC has created Control D-report NPAY758 (Educational Assistance Reported to OSC). 

Agency Actions

Agencies must review the NPAY758 report and identify employees whose educational assistance benefits as identified on the report either

  1. Exceeds $5,250

    or

  2. Exceeds $5,250 when combined with any additional educational assistance benefits paid to the employee by the agency through the NYS Central Accounting System (CAS) via Special Charge Voucher.

 
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 and Pay Period 19 Current.

For Institution pay cycle agencies, these transactions must be entered no later than Pay Period 18 Lag and Pay Period 19 Current.

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 or direct deposit advice statement.

Agencies are strongly encouraged to:

  • Provide this letter to affected employees prior to processing these transactions as advance notification will give employees time to prepare for the additional tax withholding.
  • Include additional information with this letter that identifies the specific paycheck date on which the withholding for educational assistance benefits will occur.

Questions

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