Watching our 401(k) slowly tank over the last year leaves most of us feeling that the most widely recognized employee investment vehicle is taking us for a wild, stomach-churning ride. When the market turns volatile, many employees reduce or entirely cease contributing their portion of 401(k) contributions. Now might be the perfect time to explore another type of investment for your future – education.
Many employers offer some sort of educational assistance program. In 1978 the IRS created a tax provision (under section 127 of the Internal Revenue Code) which enables employers to pay for tuition, books and fees up to $5,250 for undergraduate- and graduate-level education for employees on a tax-free basis. Establishing an educational assistance program, whether in keeping with Section 127 or independently of the tax break, enables employers to invest in their employees and has shown a marked increase in employee loyalty, satisfaction and their likelihood to remain with the company long term. Employers also benefit from the developing skills and abilities of their employees.
Educational assistance programs need to be well thought-out, documented and extended equitably to the workforce. Best practice is to set some sort of qualifying threshold for grades and a relevancy to the employee’s current or future career within the organization. Many companies establish an annual maximum they will contribute per employee and require an employee remain with the company for a certain period of time before and after receiving 100% reimbursement for their coursework.
A valuable and often overlooked benefit, education, perhaps more than your 401(k), can be counted upon to remain with you in the long run.
