How to Create an Effective Tuition Reimbursement Program

Posted on: October 28, 2022

With the impact of today’s rapidly changing technology on the employment market and soaring education costs, tuition reimbursement is an attractive, long-lasting benefit you can offer to attract new employees and retain existing employees. An added bonus of this benefit is that it helps to retain employees while they complete a program certification, educational degree, or skills certification.

How can you build a tuition reimbursement program that your employees will use – and that will advance your organization?

On average, only 2% to 5% of employees eligible for a tuition benefit program have participated.1 To move that metric, it takes thoughtful program design and effective implementation to ensure your employees reap the benefits of advancing their knowledge and skills – while at the same time strategically preparing your organization for future growth and development opportunities.

First, A Reminder About Tax Implications for Tuition Reimbursement

As you set up your tuition reimbursement program, remember that federal tax law for tuition reimbursement programs states that you can claim up to $5,250 per year, per employee as a tax deduction.

Similarly, your employees can receive up to $5,250 in tuition reimbursement each year from you without having to declare the tuition reimbursement on their federal income taxes – as long as your tuition reimbursement program has a written policy that meets federal tax guidelines. Even if employees receive tuition assistance above the annual $5,250 cap, they may be able to claim the cost as a deductible business expense if it’s job related.

Three Basic Steps to Creating a Strategic Tuition Reimbursement Program

Now that we understand the reasons why it makes sense to offer a tuition reimbursement benefit, let’s take a closer look at the basic steps required to craft a successful program.

  1. Tailor your program to organizational goals.
  2. Consider employee needs and communicate about the program.
  3. Decide how you’ll administer your plan.

While these steps sound simple, there are many things to consider for each. For example, which organizational goals can tuition reimbursement help you achieve? You might be surprised to discover the many ways this benefit can advance your organization while your employees achieve educational goals. How will you track data to provide proof the program is helping to meet those goals?

In what ways can you adapt your program in consideration of employee needs – and what tips are there for ensuring employees may use the program? What are the options when it comes to program administration?

Learn the answers to these questions and more by exploring this topic in greater depth in our whitepaper.