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2021 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
• Include a repayment policy
• Simplify your approval chain
• Lock schools list to only accredited schools
• Consider deferred payment programs instead of offering prepayment
• Communicate TuitionManager'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. INCLUDE A REPAYMENT POLICY

Most employers are now requiring employees to commit to a repayment policy. The investment into the employee's education should require employees to remain employed with the organization for a period of time after receiving tuition reimbursement. Repayment obligations typically require employees to pay back a percentage of money when the employee voluntary terminates. The time period required to remain employed with the organization is based on the paid date of the reimbursement payment. The most common repayment obligation is:

• Employees separating within twelve (12) months of receiving tuition assistance payments are responsible for 100% repayment of payments received within twelve (12) months of separation.

Some organizations have a second-tier requirement that includes the employee partially repaying tuition assistance reimbursements:

• Employees separating between thirteen (13) and twenty-four (24) months of receiving tuition assistance payments are responsible for repaying 50% of payments received within this period.

Repayment Agreement: I understand that if I voluntarily terminate my employment, then I must reimburse the company for educational assistance received for courses that are paid during the period beginning 24 months prior to termination.

5. REIMBURSEMENT PROCESS

HostedHR recommends offering one-step Program Acceptance plan + one-step Grade Submission Plan or a two-step reimbursement process.

One-step Program Acceptance plan + one-step Grade Submission
If your policy requires approval into a degree program prior to starting coursework, then the simplest setup is to include a one-step Program Acceptance plan and one-step Grade Submission plan. Through the Program Acceptance plan application, employees get approval for the degree program and all required courses to complete the degree. Once this approval has been completed then the employee would have access to the one-step Grade Submission plan to submit applications for reimbursement after completing the coursework each semester. Requiring the Program Acceptance into the degree program eliminates the need for employees to get pre-approval prior to each semester, which saves approvers and employees a significant amount of time. The approval chains can be different for each plan. Below are the recommended one-step Program Acceptance plan and one-step Grade Submission plan.

Approval Chains:

• Program Acceptance
  • Supervisor > HR
• Grade Submission
  • HR only

HostedHR recommends the above plans setup and approval chains 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.

One-Step Approval - Program Acceptance

• Employee submits application for approval prior to taking course
  • Application status: Pending
• Supervisor pre-approves application
• HR pre-approves application
  • Application status: Pre-Approved
• Employee now has access to Grade Submission plan

One-Step Reimbursement Approval - Grade Submission

• Employee submits Grade Submission application for approval
  • Application status: Pending
• HR approves documentation/payment
  • Application status: Payment Pending
• Employee is paid through automatic retrieval of payment file or manual process
  • Application status: Paid

Two-step reimbursement
A 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 and 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. LOCK SCHOOLS LIST TO ONLY ACCREDITED SCHOOLS

HostedHR recommends having a locked dropdown list of accredited schools. Most client policies require the institution to be accredited. Clients can simplify the approver's process by locking the schools list to accredited institutions, eliminating the approver having to verify the institution's accreditation. System administrators have access to add additional institutions to TuitionManager's list of over 2,500 institutions. Clients are able to add new certification institutes, training organizations, community colleges, and others as needed.

7. 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.

8. OFFER HOSTEDHR'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.

9. 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.

Tuition Assistance - Policy Template

Tuition Reimbursement Program

EMPLOYER supports the career development of all employees. The Tuition Reimbursement Program provides financial assistance to employees who wish to further their education and career in relation to their current duties and responsibilities or for potential future positions in the company.

ELIGIBILITY
All full-time and part-time employees regularly scheduled to work 24 hours or more per week, are eligible to participate in the Tuition Reimbursement Program in accordance with the following program guidelines.

• An employee must have completed three months of continuous employment prior to the course start date in order to apply for reimbursement.
• An employee must be actively employed for the duration of his/her approved course.
• An employee must not be on formal written corrective action at the time the application is submitted.
• An employee who voluntarily leaves the company is not eligible for reimbursement of courses currently in progress or for future courses.
• Participation in the program must not interfere with the performance of the employee's job duties.

COVERAGE AND BENEFIT AMOUNT
Full-time and part-time employees may be reimbursed for 100% of tuition subject to the following annual cap limits:

• $5,250 per calendar year

Covered expenses will be counted toward the annual cap limit based on the year in which the course starts. Eligible expenses include tuition expenses, required textbooks, registration fees, and technology fees.

PROGRAM QUALIFICATION
To qualify for tuition reimbursement, the degree program, individual coursework or program must develop skills relevant to the employee's current position or courses that help you advance to a higher or different position in the company. If the degree or program meets this requirement, all courses within the program will be considered for reimbursement.

• All courses must be provided by an institution holding Regional or National Accreditation recognized by the US Department of Education.
• Seminars, workshops, certifications, conferences are also covered by the Tuition Reimbursement Program if approved by employee's supervisor.

REIMBURSEMENT PROCESS
EMPLOYER utilizes TuitionManager to submit, review and approve tuition reimbursement application requests. Employees requesting tuition reimbursement should login to TuitionManager to submit tuition applications for approval.

COURSE PRE-APPROVAL
To be eligible for funding consideration, an employee must submit a tuition application in TuitionManager for course approval before each semester, term or unique course start date. Applications will be reviewed by the employee's supervisor and the program administrator to ensure compliance with all program policies for pre-approval prior to completing the education activity.

COURSE COMPLETION REQUIREMENTS
To receive reimbursement, employees are required to complete each course while they are actively employed and achieve a grade of "C" or better. A "pass" will be accepted from courses offering only a pass/fail grading option.

REIMBURSEMENT
The employee is responsible for submitting the following documentation within 60 days of course completion to be eligible for reimbursement:

• Proof of Grade / Transcript
• Itemized receipt(s)

Employees will receive reimbursement payment within 1-2 pay periods once the reimbursement has been reviewed by the program administrator and approved for reimbursement payment.

REPAYMENT OBLIGATION
An employee who voluntarily terminates, is no longer eligible for EMPLOYER’S Tuition Reimbursement Program. Any tuition reimbursement repayments paid during the twelve months prior to the employee's termination date must be repaid to EMPLOYER.

Employees participating in the tuition reimbursement program are required to acknowledge the repayment obligation on each tuition application submitted.

TAX IMPLICATIONS
Taxation of employer-provided tuition assistance is governed by Internal Revenue Code Section 127, which exempts from taxation tuition assistance payments up to a maximum of $5,250 for each employee per calendar year.

Taxability for a given calendar year is calculated using the date the application is processed for payment. Federal and state tax on tuition assistance, if applicable, will be withheld in accordance with current tax laws.

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:

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.

Learn how TuitionManager can manage your student loan assistance program.