Signed into law on Friday, March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act (H.R. 748, “CARES Act”, or “Stimulus Bill”), includes tax incentives when employers choose to offer Student Loan Repayment as a benefit.
Under the CARES Act (H.R. 748, specifically Sec. 2206(B)), employer contributions to student loans:
- May be excluded from the employee’s gross income up to $5,250 per year,
- For payments recorded on payroll up through December 31, 2020,
- When the employer adopts a Section 127 Educational Assistance plan.
With the law currently enacted through year-end 2020, you may be wondering: How likely is an extension of this favorable tax treatment?
We believe it’s pretty likely.
Section 2206(B) of the CARES Act was adopted verbatim from the Employer Participation in Repayment Act (H.R. 1043 / S. 460).
- H.R. 1043 was introduced in the House of the 116th Congress on Feb. 7, 2019 by Rep. Scott Peters (D, CA-52). The bill currently has 268 cosponsors (62% of the House); comprising 163 (60%) Democratic members, and 105 (40%) Republican members
- S. 460 was introduced in the Senate of the 116th Congress on Feb. 12, 2019 by Sen. Mark Warner (D-VA). The bill currently has 64 cosponsors (65% of the Senate); comprising 36 (56%) Republican members, and 27 (42%) Democratic members.
There are three potential scenarios under which tax-free Student Loan Repayment could be extended beyond 2020:
- The CARES Act gets extended in part, including Section 2206(B),
- S. 460 is enacted, or
- HR 1043 is enacted.
Peanut Butter has been actively involved in the advancement of this legislation for more than four years, partnering with Congressman Rodney Davis (R, IL-13) and Scott Peters (D, CA-52) to introduce legislation in 2017 and again in 2019, that was ultimately included in the CARES Act.
It is Peanut Butter’s opinion that bicameral, bipartisan support for this measure, currently in writing by a majority of Congressional members, indicates a high likelihood that the tax-free treatment of employer-sponsored student loan contributions will be extended beyond 2020.
Attract, retain and engage essential talent and critical personnel with Tax-Free Student Loan Repayment.