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2020 Tuition Assistance & Student Loan Policy Best Practice Recommendations

TuitionManager is an easy-to-use, flexible, web-based application that manages the tuition reimbursement & assistance processes. As each new customer implements our tool for their organization, we make note of several things:

• Does this policy reimburse anything outside the norm, which may be beneficial for other organizations to consider as well?
• Is this policy innovative in some way, revealing potential future trends?
• Are there any common, recurring support requests from this customer that are a direct result of a particular policy requirement?

This document is intended to highlight the best practices and lessons learned across customers of all sizes and all industries that utilize TuitionManager, updated annually.

Recommendations

• Reimburse the same amount for all employees regardless of employment status
• Reimburse 100% for all acceptable grades - do not penalize working students for having less time to study when trying to balance work performance and schoolwork
• Reimburse for certifications
• Enforce limits based on start date of course
• Simplify your approval chain
• Consider deferred payment programs instead of offering prepayment
• Communicate HostedHR's education partners network and discounts
• Clearly communicate a year-end deadline for submitting tuition applications to be reimbursed in the current calendar year

Best Practices

1. ELIMINATE UNNECESSARY COMPLEXITIES

Switching from a manual process to automated software is already a change in process and may also be the perfect time to re-evaluate policy complexities. No matter how simple your software tool is, policy complexity will often still result in:

• Employee frustration – an overly-complicated policy often leads to an excess of support questions and calls coming into HR from employees and can even lower participation rates. If an employee is not confident that their request will be reimbursed after paying up front out-of-pocket, that may influence the decision of whether or not they choose to participate.
• Administrative headaches – each additional policy requirement adds unique, sometimes hidden, special case scenarios and exceptions that require significant time to research, review, and resolve (ie: you may spend 80% of your time on 20% of requests).
• Software customizations – customizations are only as good as customer-specific testing of those features, and will often result in a delay of upgrading to newer versions of the tool which might offer more features or improvements of existing features because of the requirement to migrate the customizations (or even possibility that the customizations cannot be migrated).

2. REIMBURSE AT 100% UP TO LIMIT

A common practice is to reimburse a lower amount for part-time employees vs. full-time employees. For example, a full-time employee may be eligible for $3,000/yr while a part-time employee may receive only up to $1,500. How that difference in dollar limit is implemented can be a big difference in ease of administration:

Option 1: reimburse 100% up to $3,000 for FT; 50% of costs for PT.

This option creates several issues for the part-time employee population. For example, if the employee takes a college course for $100:

• The employee may immediately enter $50 knowing the policy reimburses only 50%, but the system could be configured to automatically adjust 50% of the entered amount, resulting in a requested amount of $25.
• If the system adjusts to 50% at the time of submission, then any variance from what the employee requests vs what they should really be paid for the request would require an approver to manually calculate the new amount.
  • Ex: eligible amount for the course is really $90, so the approver must approve for $45 after doing the calculation (Note: $90 / 2 is a simple calculation but reimbursing 85% of $504.32 can be more complicated and frustrating for administrators).
• If the amount is adjusted systematically at the time of final approval, then the system would be counting the full $100 against the employee’s available balance until the time it is approved and adjusted to $50, which prevents employees from submitting additional requests for funds they would otherwise be entitled to.

Option 2: reimburse 100% for all employees, but with different limits.

This option eliminates each issue above in option #1, because the limit is set at $3,000 for full-time and $1,500 for part-time. The end result is also the same: a part-time employee will never receive more than $1,500 for the year – they will just receive the money in a much more straight-forward manner.

This option will also increase the participation rate of part-time employees. A part-time employee, in general, is going to have a lower income than full-time employees, which translates to less disposable income. If a part-time employee is then required to pay 50% of their own costs, they are less likely to be able to participate due to financial limitations.

3. STANDARDIZE REQUIREMENTS, ADJUST AMOUNTS

Whether you categorize your policy by employment status, physical location, or some other segment, having a standard policy across each will streamline administration & reporting as well as minimize employee confusion as they transition between those segments. Consider standardizing the following:

• Educational activities (college course, certifications, training requests, etc.) – if one segment can be reimbursed for certifications, all should be.
• Degree types (Associate, Bachelors, Masters, Doctorate) – if one segment can be reimbursed for Masters, all should be. If dollar limits vary by degree for one segment, they should vary for all.
• Grades - reimburse for the same grades across all segments. Undergraduate can be reimbursed for A, B, or C while graduate requires A or B, but that should be the same across all segments.
• Eligibility requirements - all employees are eligible (for *some* amount) after x days from their hire date, assuming a minimum of y standard weekly hours worked.
• Application fields - each location or segment should contain the same application fields for a college course; the same fields for a certification request, etc.
• Deadlines - all segments should institute the same deadline for attaching documentation after the course is complete (ex: 45, 60, 90 days), as well as the same advanced notice prior to the course beginning.

Once you've standardized those components of your policy, you can more easily apply different amounts to those segments. This also allows employees to easily transition between segments without needing to process the application as an exception. For example, if an employee changes from part-time ($1,500) to full-time ($3,000), the only thing that changes with any of their applications is that their available balance is now higher.

However, if an employee moves from location A to location B, and location B has an individual degree dollar limit that wasn't part of location A's policy, you would need to spend additional time determining how to treat this application as an exception, and how that exception may factor into other applications for this employee for the same plan year.

4. CALCULATE DOLLAR LIMITS BASED ON COURSE START DATE

Balances can be calculated in one of two ways: based on the entered date (start or end), or paid date. While paid date will more accurately enforce IRS limits, it comes with several disadvantages:

• At the time the employee submits the application, the system has no way of knowing the future date at which it will be paid. The result is that the employee cannot accurately know in advance whether they will end up paying out-of-pocket or if they will be reimbursed as they expect. There are several manual steps that can delay the payment date that cannot be built into any automated software tool:
  • An employee may not receive their final grade from their school in a timely manner after the end date
  • An employee may not be able to attach the documentation quickly for another reason out of their control
  • Administrative approvers may have many requests to process at that particular period of time (ex: year-end)
  • The payment cycle may result in the approved application not being sent to the customer's payroll or AP system for up to 2 weeks from the approval date
  • The payment file may still take a few additional days to be processed and make it into the employee's paycheck from the time it is sent from TuitionManager
  • Holidays may delay the approval time further
• Approximately 40% of tuition applications are for courses in the Fall semester, which usually end around mid-December; that means 40% of applications every year will experience these issues due to end of year timing.

The alternative to paid date is calculating based on the start or end date of the course, which includes several advantages, but the potential for the employee to owe tax:

• The employee will be able to see their available balance as they fill out their application
• The employee can be prevented from exceeding their remaining balance at the point they click 'Submit Application', so they're never wondering whether they will ultimately need to pay for the course out-of-pocket. As long as the course is pre-approved (for adherence to the policy), and as long as they pass the course with an acceptable grade, they will be reimbursed.
• Employees do not have to worry about whether their grades and receipts will be received at year-end in a timely manner in order to receive reimbursement against the current year's limit.
• Employees may have to pay tax if payment does not occur until the following year and the employee exceeds the IRS limit of $5,250 per calendar year.

5. TWO-STEP REIMBURSEMENT PROCESS

Two-step reimbursement process allows the employee to know prior to enrolling in a course if the employee is eligible and the educational costs are reimbursable. This eliminates questions or confusion when trying to be reimbursed after a course is completed and the educational costs are already paid. Below is the recommended two-step process and approval chain.

Approvals

• Step 1 - pre-approve application
  • Initial Application Approval Chain: Supervisor > HR
• Step 2 - approve documentation & payment
  • Post-Class Documentation Approval Chain: HR only

HostedHR recommends the above approval chain and two-step process to simplify approval of tuition reimbursement. TuitionManager administers eligibility, program limits, balance calculations, routing tuition applications to the required approvers, taxability, and even the payment process.

Step 1

• Employee submits application for approval prior to taking course
  • Application status: Pending
• Supervisor pre-approves application
• HR pre-approves application
  • Application status: Pre-Approved

Step 2

• Employee submits follow-up documentation after completing course
  • Application status: Documentation Pending
• HR approves documentation/payment
  • Application status: Payment Pending
• Employee is paid through automatic retrieval of payment file or manual process
  • Application status: Paid

6. ELIMINATE PREPAYMENT

HostedHR recommends building relationships with trusted school partners that offer Deferred Corporate Tuition Assistance Programs instead of offering prepayment. It is often difficult and cost-prohibitive to recover prepaid funds. Many schools offer deferred payment options in which employees are able to complete coursework and defer tuition payments until after course completion. This allows employees unable to cover the upfront cost of tuition to enroll and complete their degrees with the assistance of their employer's tuition reimbursement benefit.

7. OFFER TUITIONMANAGER'S EDUCATION NETWORK

HostedHR has built an extensive network of education partners that offer TuitionManager users education discounts. Employees can receive discounted tuition by enrolling in an education partner school. Our education partners offer programs and discounts that enable employees to graduate faster, with more flexibility, and at a lower cost. Communicating the benefits of our tuition partners and discounts helps employees eliminate student debt and saves employers money as a result of lower tuition costs and faster degree completion.

8. YEAR-END DEADLINE

HostedHR recommends including in your policy a December 15th year-end deadline for submitting tuition applications for payment in the current calendar year. This is to allow your administrators to have sufficient time to process tuition reimbursement requests and approve for payment in time for payroll to be able to include on the employee’s paycheck. Things to consider when creating a year-end deadline:

• HostedHR recommends not making the year-end deadline too early, because the fall semester usually ends early to mid-December so the earlier the deadline, the more complaints from employees who don't have their grades by the deadline date.
• Including in your policy or employee communication that any tuition applications submitted after December 15th will be processed in the order received and there is no guarantee payment will occur in the current year.
• Lag time from when the payment file is generated until reimbursement shows up in the employee's paycheck.
• Vacations and holidays – consider the timing of the year-end deadline, because if administrators are out of the office between the deadline date and January 1st, that will impact what applications will be paid. Or if there are other manual steps taken by Payroll staff or others, their schedules need to be taken into account as well.
• A cutoff date still needs to factor in how long it takes to approve the applications:
  • The number of applications submitted on or around the year-end deadline date will be a higher volume than normal
  • A portion of the applications will always have insufficient documentation upon initial submission by employees and will need follow-up contact to gather what is needed and require additional time.
• Require all documentation to be submitted by December 15th to ensure payment in the current calendar year. If any documentation is missing or there is a delay in submitting documentation for any reason, then payment may not occur until the following year. This is especially important for Paid Date balance calculations in which the money would be taken from the employee's available balance for the following calendar year. Additionally, employees may owe tax if they go over the IRS limit of $5,250 in a calendar year.
• Employee communication: add an announcement to the employee homepage in TuitionManager in addition to sending an internal company email.

Student Loan Assistance

TuitionManager is an easy-to-use, flexible, web-based application that manages the employer student loan repayment process. There are three types of student loan assistance options that employers may offer:

1. Student Loan Repayment Assistance Program (SLRAP)
2. Student Loan PTO Exchange
3. Student Loan Employer 401(k) Match

Policy Overviews

Student Loan Repayment Assistance Program (SLRAP)

SLRAPs are growing in popularity and receiving significant attention as a result of the improved recruitment and increased retention employers are experiencing from the new benefit. SLRAPs offer employees a monthly payment towards the principal of their student loans. Typically, there is a lifetime limit on the policy. Employers offer competitive SLRAPs in order to attract and retain the best talent. All amounts paid to a SLRAP are taxable income for an employee.

Student Loan PTO Exchange

Student Loan PTO Exchange is a creative solution to allow employees to elect to use accrued and unused PTO towards student loan relief. Employees are eligible to receive student loan relief based on the employee's hourly wage rate and hours earned toward PTO. Employers either offer a dollar limit to the policy so that all employees are eligible for the same annual payment amount or an hour limit, typically 40 hours, to the amount of PTO that can be exchanged for loan relief. Student Loan PTO Exchange is a substantial benefit for employees to utilize toward financial well-being.

Student Loan Employer 401(k) Match

Matching employee student loan payments with an employer contribution to the employee's 401(k) plan drastically improves the employee's ability to save for retirement at a younger age. Employees making student loan payments are eligible to receive their employer's 401(k) contribution match. Empowering employees to begin saving for retirement while still being able to pay off student debt is a significant long-term financial advantage and benefit for employees.