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Date: November 16, 2015

Bulletin Number: 1437

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Subject

Educational Assistance Benefits

Purpose To provide agencies with instructions for processing taxable educational assistance benefits for 2015.

Affected Employees

Employees who receive employer and/or union (PEF and/or CSEA) paid qualified educational assistance benefits that exceed the $5,250 exclusion limit for calendar year 2015.

Background

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 will create 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. Exceed $5,250

                         or

  1. Exceed $5,250 when combined with any additional educational assistance benefits paid to the employee by the agency through the NYS Statewide Financial System (SFS) Accounts Payable voucher process.

The amount exceeding $5,250 is considered the “taxable amount” and must be reported in PayServ through either Time Entry or the agency Miscellaneous File.

To report the taxable amount through Time Entry, use the Earnings 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 19 Lag (check dated December 30, 2015) and Pay Period 20 Current (check dated December 30, 2015).

For Institution pay cycle agencies, these transactions must be entered no later than Pay Period 18 Lag (check dated December 24, 2015) and Pay Period 19 Current (check dated December 24, 2015).

Payroll Register and Employee’s Paycheck/Advice

The Earnings Code EDA and the amount will appear on the employee’s paycheck or direct deposit advice statement.

Communication to Affected Employees

OSC has prepared the attached 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. This 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 emailed to the Tax and Compliance mailbox.