When employers offer educational benefits, having the correct Section 127 EAP documents is essential. These documents establish the legal framework that ensures tax‑free assistance under Section 127 of the Internal Revenue Code. With the program set to end student loan reimbursement after December 31, 2025, employers should take action now to align their documentation and policies.
What Are Section 127 EAP Documents?
Section 127 documents for an Educational Assistance Program (EAP) typically include:
A written plan document outlining all program terms
A Summary Plan Description (SPD) that simplifies the rules for employees
Enrollment and claim forms for participants
An administration guide for HR and benefits teams
A resolution by leadership formally adopting the EAP
These components ensure compliance with IRS and Department of Labor standards, providing clarity for both administrators and participants.
Why Proper Documentation Matters
The IRS mandates that employers offering Section 127 benefits must have a formal written plan and clearly notify employees of its availability and terms. Without this documentation, educational assistance—such as tuition reimbursement or student loan payments—cannot be excluded from an employee’s taxable income.
What the Documents Need to Cover
Here’s what the documentation must address:
Eligibility criteria: Who can participate; for example, full-time vs. part-time, tenure-based thresholds.
Types of assistance: Whether the plan covers tuition, fees, books, supplies—and, until December 31, 2025, student loan principal or interest .
Annual limits: Under Section 127, the maximum tax‑free benefit is $5,250 per employee per calendar year.
Non‑discrimination rules: The plan may not favor highly compensated employees or principal owners—only up to 5 % of benefits may go to >5 % owners.
Prohibited items: Meals, lodging, transportation, retained tools, and hobby-related courses generally aren’t eligible.
Notification protocols: Employers must reasonably notify eligible employees about the program and any updates.
Why Update Now Before Reimbursement Ends
Student loan reimbursement under Section 127 is currently permitted only until December 31, 2025, thanks to COVID‑era relief measures. Employers must revise their EAP documents to reflect this sunset, ensuring clarity for HR and staff and preventing employee misunderstanding.
Final Thoughts
Section 127 EAP documents are more than paperwork—they’re a compliance anchor. A comprehensive set of plan documents, SPD, forms, and internal adoption records ensures employers can offer tax‑advantaged educational benefits—including student loan assistance through the end of 2025. With the upcoming changes, now is the time to audit your documentation, update your provisions, and communicate clearly to employees. Proper documentation protects tax status, prevents errors, and keeps everything above board.
For more info, visit here:- ICHRA