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Tuition Reimbursement

One of the most important and generous benefits a company can offer is tuition reimbursement, a contractual arrangement between employer and employee that outlines specific terms under which the employer may pay for the employee's continuing education. Today, tuition reimbursement benefits are also called tuition assistance, and vary greatly from company to company.

It generally takes a solid, well-established company to be able to offer what could amount to $10,000 per semester or more for eligible employees. So don't look for too many startups to include tuition assistance as a regular part of their compensation package. However, distance learning technologies are providing new opportunities for employees to receive degrees from virtual (and nonvirtual) universities at much lower cost than traditional study programs.

Just because a company says it believes in personal development, though, don't assume it offers tuition reimbursement. If this benefit is important to you, perhaps because you want to complete a bachelor's degree or earn an advanced degree, it makes sense to clarify the scope of your intentions and the company's capabilities up front.

Study hard - or get stuck with the bill
Most companies that offer tuition reimbursement base the amount on the employee's grade in the course or courses. If the employee earns a grade below a B, many companies won't pay. In addition, some companies pay for the course at registration, but others reimburse the cost only after successful completion of the coursework. When investigating a tuition assistance program, ask about timing of reimbursement, since that could make a difference in how many classes you take at one time.

Most companies say reimbursable coursework has to be "work-related," but definitions of "work-related" vary. For example, some companies pay only for classes related to the job an employee is doing now, while others pay for classes that develop professional skills such as management that help employees grow into new positions. Companies that are truly concerned with career development will pay for future-oriented education.

Because tuition reimbursement is such an expensive benefit, some companies withhold payments for up to a year, so that students can prove themselves on the job. Withholding the money is also a way to ensure that employees don't leave right after they earn a degree at the company's expense. Other companies simply deduct what they paid for education from an employee's final paycheck - and continue to send bills - if the employee leaves sooner than the company considers appropriate.

Employee scholars reap tax benefits
Tuition reimbursement used to be treated as taxable income to the employee. In 1996, however, Congress approved some sweeping changes that resulted in lower taxes for a number of sectors, and "employee scholars" were among the lucky ones. The tax-free status is good for up to $5,250 of annual employer-provided assistance benefits through the year 2010. Starting in 2002, it applies to both the undergraduate and graduate levels. Visit the IRS site page on Educational Expenses to find out more about educational tax credits and eligibility.

In many companies, if the course is not job-related, but still approved by the firm, it is considered a taxable benefit and the relevant amount is withheld from the employee's reimbursement.

It doesn't hurt to ask
Tuition assistance is a powerful benefit. And sometimes the benefit is completely at the discretion of the manager, so it's important to ask.

Even companies that don't offer college assistance may permit other kinds of learning. For instance, one large company Salary.com spoke to has no written policy on training. But inquisitive employees may learn that it offers up to $1,500 per year per employee for training programs and unlimited access to an online university.

Other companies have strict policies that outline how much they'll pay and how they'll pay it (e.g., 75 percent for degree and certificate programs, up to $3,000 per associate per calendar year, or 50 percent for personal growth and development coursework, up to $1,000 per associate per calendar year), using the institution's tuition deferral policy as the preferred method.

The employee is usually responsible for the administration behind the courses - varying waiting periods, managerial approvals, documentation from the school, and so on. But it's well worth the effort.

Academic institutions value educated employees the most
So what kind of employer respects learning the most? It's no surprise that universities top the list. Major metropolitan area colleges that we spoke to provide unlimited course privileges and degrees at no cost to their employees - for as long as they are employed by the institution. Similarly, after five years of employment, all of an employee's children who apply for undergraduate admission and who can meet the academic requirements receive a tuition waiver. A very big benefit indeed.