Providing employees the opportunity to update their knowledge, skills and abilities should be one of your organization’s top priorities. While this article is not going to expound upon the merits of updating an employees’ knowledge skills and abilities, I will discuss the differences between Professional Development and Tuition Reimbursement. It has been my experience that these two monikers are used interchangeably by organizations. On the surface, both of these titles sound quite similar, but in fact they are very different. This leads to the ever important question – why should our organization care how to classify Professional Development and Tuition Reimbursement. You should care because the documents you make employees sign, such as an employee handbook or Professional Development Reimbursement form, could be incorrect under IRS Regulation 127 – Educational Assistance Programs. Further, misclassifying your expenses could lead to other IRS penalties and fines if you happen to be audited.
IRS Regulation 127 allows employers to pay, at no cost to the employee, for educational classes that lead to a degree from an accredited university or college. The regulation allows an employer to pay up to a maximum of $5,250 per year before having to add any amount over $5,250 to an employees’ gross wages. Where a lot of organizations run into an issue is by allowing employees to use their yearly tuition reimbursement for seminars, conferences and certifications.
To understand why a lot of companies make this mistake, I should explain the differences between Professional Development and Tuition Reimbursement. Professional Development is the overarching program that allows your employees to develop their knowledge, skills and abilities outside their day-to-day job responsibilities. Components of a Professional Development Program include both a Tuition Reimbursement Program and an Offsite Training Program. An offsite Training Program would encompass certifications, seminars and conferences. The former, Tuition Reimbursement Programs, include any degree related programs that are job applicable, including Associate, Bachelor, Masters or PHD.
After explaining these differences between the Professional Development and Tuition Reimbursement, how can you ensure your organization is not misclassifying a Professional Development Program they are participating in? You can do this by following the steps outlined below.
- Review your employee handbook, or policy manual to determine if you mention either Professional Development or Tuition Reimbursement.
- If you find a combination of the two programs, create a Professional Development Policy that makes a distinction between Tuition Reimbursement and Offsite Training
- Create two separate forms that track both Tuition Reimbursement and Offsite Training
- Update your Employee Handbook to ensure all documents are consistent with this new policy
- Ensure the new Professional Development Policy, Employee Handbook and any another forms that require updating, are provided to your employees. The best way to ensure all your employees have access to the updated documents is to put them on your company intranet.
Ensuring proper distinction between your Professional Development and Tuition Reimbursement Programs allows your organization to correctly track and monitor the ways employees are updating their knowledge, skills and abilities. Just because you can’t classify a conference, seminar or certification as “tuition reimbursement” doesn’t mean your employees have to go without updating their skills. Instead, a lot of organizations plan for Offsite Training Programs in their individual department budgets. Another alternative, if your organization can’t afford to offer both Tuition and Offsite Training, is to let employees pick one type of program or the other. If an employee participates in the Tuition Reimbursement Program, they are not eligible for the Offsite Training Program – and vice versa.