Career Crossing

Many companies attract and keep workers by helping with tuition. Recent tax changes benefit the employer and the employee

February 27, 2005|By Susan Bowles | Susan Bowles,SPECIAL TO THE SUN

As an event planner in Northern Virginia, Meghan Noone ached to return to school.

The 2000 graduate of Washington College had been in the job market for a couple of years, and the further "away I got from college, the more I knew I wanted to go back."

Yet graduate school was a financial pipe dream.

Then Noone began looking for a new job. And she learned that the Johns Hopkins University covers up to $5,250 in tuition each year for full-time employees who take classes at one of the university's academic divisions. Courses don't have to be related to the employee's work, and the benefit also applies to spouses and dependent children.

"It was actually one of the reasons I was interested in working for Hopkins," Noone says.

She joined the university's undergraduate admissions office a little more than a year ago. Today, Noone works full time, takes courses toward a master's degree in liberal arts and sings the praises of her employer.

As companies and organizations compete to attract and keep qualified employees, they're turning toward tuition reimbursement as way to build a talented team of loyal workers. And even though the tuition benefits offered by many companies have not kept pace with the spiraling cost of college courses, experts say workers still consider the assistance a valuable perk.

Tuition reimbursement programs have been around since the 1960s. But tax changes since 2000 have made them more palatable. Companies can deduct up to $5,250 a year in education benefits per employee, and the money isn't considered income for the worker.

Besides its tax advantages, tuition reimbursement also enjoys autonomy. No federal mandates require how programs should be run, meaning businesses can structure them as they see fit.

And they do. Some companies reimburse above the $5,250 mark; some reimburse below it. Some businesses insist that classes be job-related; others let employees take whatever courses they want. Some pay only if an employee earns a grade of A or B; others are more lenient.

But whatever the structure, tuition reimbursement has become a standard part of many companies' benefits packages.

Data from the American Society for Training & Development in Alexandria, Va., show tuition reimbursement makes up about 12 percent of businesses' training expenditures. The 12 percent figure has remained relatively constant since 1996, when the association began tracking reimbursement. It also has remained steady regardless of a company's size, says Brenda Sugrue, the association's senior director of research.

"It's almost an easy one for all companies to do," she says. "Then individuals can choose to use it or not."

But in many cases the level of reimbursement hasn't matched the rise in tuition costs in the past decade.

In 2004 dollars, average tuition and fees for public four-year colleges and universities rose 51 percent in the past decade, says the College Board, the not-for-profit association of 4,300 of colleges and universities. Tuition and fees at private four-year colleges are up 36 percent for the same period. They are up 26 percent at public two-year colleges.

Less is reimbursed

All of which means that tuition-reimbursement programs today aren't providing the same benefit they did 10, five, even two years ago.

But does it matter? Probably not, says Sheldon E. Steinbach, general counsel to the American Council on Education in Washington.

"People are so happy to have an advanced education and to have their employer pay for it, I have not heard anyone in the past decade complain that there's no inflationary figure."

Gary B. Kushner, an employee benefits expert and a member of the Society for Human Resource Management in Alexandria, says, "We're certainly spending more than we ever have on [employer-paid] education."

And while rising tuition could at some point have a chilling effect on how many people take advantage of the benefit and what companies approve, "I'm not sure we're seeing it yet," he said.

The programs are relatively easy to inaugurate, even for small companies. Because there are no mandates, executives can budget whatever they deem appropriate and structure the benefit in whatever way works best for the business.

"When you're smaller, you don't have to have as many cut-and-dried rules," says James E. Stevenson, chief financial officer of ABS Capital Partners.

The Baltimore private equity firm, which employs 31 people in three U.S. offices, has offered tuition reimbursement since spinning off from Alex. Brown Inc. in 1997.

Employees interested in taking advantage of the benefit must get approval from their supervisors. ABS then pays 100 percent of the tuition if the course relates to the firm's business and the employee earns at least a B.

16% used program

Five of ABS' employees - about 16 percent - have used the program.

In general, not all employees can take advantage of such programs.

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