Section 127 Plans: Establishing a Written Plan Document

As an employer, setting up a Section 127 Educational Assistance Plan can be a great way to attract and
retain top talent while also providing your employees with valuable educational opportunities. However,
before you can implement such a plan, there are a few key items you need to determine to ensure the
plan meets your specific offering goals.

Section 127 of the Internal Revenue Code requires that employers execute a written plan and provide
notice of benefit eligibility to all employees. This means that in addition to determining the specific
details of your Section 127 plan, you will also need to create a formal written plan document and
communicate the details of the plan to your employees.

Once you have established a written plan and communicated the details of the plan to your employees,
you can move forward with defining the specifics of the plan. This might include:

1. Identifying the Tax ID of the Entity or Entities You Wish to Cover

2. Defining the Start Date that an Employee Would be Eligible

3. Determining Which Employee Types are Eligible for the Plan

4. Defining Other Requirements Under Section 127 Educational Assistance Plans

1. Identify the Tax ID of the Entity or Entities You Wish to Cover

One of the first things you need to determine when setting up a Section 127 plan is which entity or
entities you want to cover. This might include your parent company, any subsidiaries, or even related
partnerships or joint ventures. It's important to identify these entities early on, as it will help you
determine who is eligible for the plan and who is responsible for administering it.

2. Define the Start Date that an Employee Would be Eligible

Another important consideration when setting up a Section 127 plan is determining when an employee
will become eligible for the plan. This might be immediately upon hire, or you may choose to require a
certain waiting period before an employee can participate. Waiting periods might be 30, 60, or 90 days,
or you may choose to define your own eligibility requirements that better suit your company's needs.

3. Employee Type that is Eligible

In addition to determining when an employee will be eligible for the plan, you also need to define which
employees are eligible. This might include full-time employees, part-time employees working at least a
certain number of hours per week, or project or temporary workers. Be sure to define eligibility
requirements in a way that makes sense for your company and any legal requirements.

4. Other Requirements Under Section 127 Educational Assistance Plans

Finally, there may be other requirements you need to consider when setting up your Section 127 plan.
For example, you will need to determine the maximum amount of educational assistance that will be
provided, as well as the types of educational expenses that are eligible for reimbursement. You will also
need to ensure that the plan complies with all relevant tax laws and regulations, including Section 127 of
the Internal Revenue Code.

By taking the time to carefully consider these factors and working with a qualified HR or benefits
consultant, you can set up a Section 127 Educational Assistance Plan that meets your company's specific
offering goals while also providing valuable educational opportunities to your employees.

Section 127 of the Internal Revenue Code provides an opportunity for employers to support their
employee's continuing education. By understanding the requirements and considerations involved in
setting up such a plan, you can ensure that your plan is both compliant and effective in meeting your
company's goals.