Education as a fringe benefit

There’s an age-old struggle between academia, which seeks the pursuit of knowledge for its own purposes, and business, which has an interest in applying and focusing it toward specific corporate ends. The tension was nicely captured by a recent comment of Cleveland State University’s Donald Golden, chairman of the department of computer and information science. “We can’t tailor programs to the day-to-day needs of particular organizations, but we don’t want to be an ivory tower institution, either.”

While the professor was speaking about courses obtained for credit toward a degree, there’s been an exploding trend toward noncredit college education customized around the needs of particular companies. And colleges and universities in this area have been only too happy to mold their offerings around the market’s needs.

“We’ll go out anywhere, anytime to talk to a company about custom-designing programs for them,” says Dr. Ferris Anthony, dean of continuing education at Cleveland State University. Since 1975, he boasts, “We’ve taken our classes off-campus and offered them in hotels, hospitals and libraries. We were the first, by far, to do custom-designed, on-site training. Any size company, anyplace.”

Other institutions have also moved aggressively to chase that market. While the Case Western Reserve University’s Weatherhead School of Business’ Corporate University has concentrated mostly on providing customized courses for the largest companies—generally those with $500 million or more in sales—John Carroll University has custom-designed an on-site MBA program for employees of credit card issuer MBNA.

That’s not all, says JCU’s continuing education director Christine Gibbons. “We just did a five-session program for Consolidated Natural Gas—fundamental finance for nonfinance managers.” The school has mounted a similar program for The Cleveland Clinic Foundation and recently put together a custom-designed course on supply-chain management for a local logistics company.

While many of its nondegree courses are offered in “certificate” programs, CSU in particular has been attuned to the “degree-completion” market. “That’s huge,” says Dean Anthony. “You have adults who have completed a year or two of college and never went back.”

Employers can step in to offer tuition reimbursement. Why? Because in many cases, they can take a tax deduction for doing so, making tuition reimbursement a particularly attractive fringe benefit.

Since the late 1970s, the federal government has permitted companies to take tax deductions in return for offering employees tuition assistance. The tax code does contain some qualifiers, according to Patricia Shlonsky, an attorney with Ulmer & Berne LLP. They include:

  • Taxable tuition reimbursement is capped at $5,250 per employee in each calendar year.
  • Such educational benefits must be offered under a written plan, which does not discriminate in favor of highly paid employees.
  • No more than 5 percent of the total educational assistance paid by the company can go toward company shareholders or other owners, or their family members.
  • Educational reimbursement cannot be offered through so-called “cafeteria” plans, which allow employees to select from among a number of different fringe benefits.
  • The program cannot fund graduate level courses leading to professional degrees, such as those in law, medicine or business—including, surprisingly, MBAs.

Throughout higher education, says CSU’s Ferris Anthony, “the trend today is responsive education. Our campus isn’t just CSU, it’s the entire town. And employers in the Cleveland area really support their employees going back to school.”

Employer’s checklist: Tuition reimbursement no-no’s

Here are a few items barred under Section 127 of the federal tax code, which sets the rules for educational assistance programs eligible for corporate tax credits:

  • No reimbursement for courses leading to graduate professional degrees—including MBAs.
  • No more than $5,250 per employee each year.
  • No discrimination for highly paid employees.
  • No tuition reimbursement through cafeteria plans.
  • No more than 5 percent of company tuition spending on owners and their families.

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