I 

112TH CONGRESS 

2D SESSION H. R. 5129 

To amend the Internal Revenue Code of 1986 to exclude from gross income 

amounts paid by an employer on an employee’s student loans. 

IN THE HOUSE OF REPRESENTATIVES 

APRIL 27, 2012 

Mr. ISRAEL introduced the following bill; which was referred to the Committee 

on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to exclude 

from gross income amounts paid by an employer on 

an employee’s student loans. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Student Loan Employ5 ment Benefits Act of 2012’’. 

6 SEC. 2. STUDENT LOAN PAYMENT ASSISTANCE PROGRAMS. 

7 (a) IN GENERAL.—Part III of subchapter B of chap8 ter 1 of the Internal Revenue Code of 1986 is amended 

9 by inserting after section 127 the following new section: 


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1 ‘‘SEC. 127A. STUDENT LOAN PAYMENT ASSISTANCE PRO2 GRAMS. 

3 ‘‘(a) IN GENERAL.—Gross income of an employee 

4 does not include amounts paid or incurred by the employer 

5 for student loan payment assistance provided to such em6 ployee if the assistance is furnished pursuant to a program 

7 which is described in subsection (d). 

8 ‘‘(b) LIMITATION.—The amount taken into account 

9 under paragraph (1) with respect to an individual for stu10 dent loan assistance with respect to student loan payments 

11 during a taxable year shall not exceed $5,000. 

12 ‘‘(c) EARNED INCOME LIMITATION.—The amount ex13 cluded from the income of an employee under subsection 

14 (a) for any taxable year shall not exceed the earned income 

15 of such employee for such taxable year. 

16 ‘‘(d) STUDENT LOAN PAYMENT ASSISTANCE PRO17 GRAM.— 

18 ‘‘(1) IN GENERAL.—For purposes of this sec19 tion a student loan payment assistance program is 

20 a separate written plan of an employer for the exclu21 sive benefit of his employees to provide such employ22 ees with student loan payment assistance which 

23 meets the requirements of paragraphs (2) through 

24 (9) of this subsection. If any plan would qualify as 

25 a student loan payment assistance program but for 

26 a failure to meet the requirements of this subsection, 


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1 then, notwithstanding such failure, such plan shall 

2 be treated as a student loan payment assistance pro3 gram in the case of employees who are not highly 

4 compensated employees. 

5 ‘‘(2) DISCRIMINATION.—The contributions or 

6 benefits provided under the plan shall not discrimi7 nate in favor of employees who are highly com8 pensated employees (within the meaning of section 

9 414(q)). 

10 ‘‘(3) ELIGIBILITY.—The program shall benefit 

11 employees who qualify under a classification set up 

12 by the employer and found by the Secretary not to 

13 be discriminatory in favor of employees described in 

14 paragraph (2). 

15 ‘‘(4) PRINCIPAL SHAREHOLDERS OR OWNERS.— 

16 Not more than 25 percent of the amounts paid or 

17 incurred by the employer for student loan payment 

18 assistance during the year may be provided for the 

19 class of individuals who are shareholders or owners 

20 (or their spouses or dependents), each of whom (on 

21 any day of the year) owns more than 5 percent of 

22 the stock or of the capital or profits interest in the 

23 employer. 


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1 ‘‘(5) NO FUNDING REQUIRED.—A program re2 ferred to in paragraph (1) is not required to be 

3 funded. 

4 ‘‘(6) NOTIFICATION OF ELIGIBLE EMPLOY5 EES.—Reasonable notification of the availability and 

6 terms of the program shall be provided to eligible 

7 employees. 

8 ‘‘(7) STATEMENT OF EXPENSES.—The plan 

9 shall furnish to an employee, on or before January 

10 31, a written statement showing the amounts paid 

11 or expenses incurred by the employer in providing 

12 student loan payment assistance to such employee 

13 during the previous calendar year. 

14 ‘‘(8) BENEFITS.— 

15 ‘‘(A) IN GENERAL.—A plan meets the re16 quirements of this paragraph if the average 

17 benefits provided to employees who are not 

18 highly compensated employees under all plans 

19 of the employer is at least 55 percent of the av20 erage benefits provided to highly compensated 

21 employees under all plans of the employer. 

22 ‘‘(B) SALARY REDUCTION AGREEMENTS.— 

23 For purposes of subparagraph (A), in the case 

24 of any benefits provided through a salary reduc25 tion agreement, a plan may disregard any emVerDate Mar 15 2010 01:38 May 03, 2012 Jkt 019200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H5129.IH H5129

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1 ployees whose compensation is less than 

2 $25,000. For purposes of this subparagraph, 

3 the term ‘compensation’ has the meaning given 

4 such term by section 414(q)(4), except that, 

5 under rules prescribed by the Secretary, an em6 ployer may elect to determine compensation on 

7 any other basis which does not discriminate in 

8 favor of highly compensated employees. 

9 ‘‘(9) EXCLUDED EMPLOYEES.—For purposes of 

10 paragraphs (3) and (8), there shall be excluded from 

11 consideration— 

12 ‘‘(A) subject to rules similar to the rules of 

13 section 410(b)(4), employees who have not at14 tained the age of 21 and completed 1 year of 

15 service (as defined in section 410(a)(3)), and 

16 ‘‘(B) employees not included in a student 

17 loan payment assistance program who are in18 cluded in a unit of employees covered by an 

19 agreement which the Secretary finds to be a 

20 collective bargaining agreement between em21 ployee representatives and 1 or more employees, 

22 if there is evidence that student loan payment 

23 benefits were the subject of good faith bar24 gaining between such employee representatives 

25 and such employer or employers. 


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1 ‘‘(e) DEFINITIONS AND SPECIAL RULES.—For pur2 poses of this section— 

3 ‘‘(1) STUDENT LOAN PAYMENT ASSISTANCE.— 

4 ‘‘(A) IN GENERAL.—The term ‘student 

5 loan payment assistance’ means the payment of 

6 principal or interest on— 

7 ‘‘(i) any indebtedness incurred by the 

8 employee solely to pay qualified higher 

9 education expenses (as defined in section 

10 221) which— 

11 ‘‘(I) are paid or incurred within a 

12 reasonable period of time before or 

13 after the indebtedness was incurred, 

14 and 

15 ‘‘(II) are attributable to edu16 cation furnished during a period dur17 ing which the employee was an eligible 

18 student, or 

19 ‘‘(ii) any indebtedness used to refi20 nance indebtedness described in clause (i). 

21 Such term shall not include any payment of 

22 principal or interest on indebtedness owed to a 

23 person who is related (within the meaning of 

24 section 267(b) or 707(b)(1)) to the taxpayer or 

25 to any person by reason of a loan under any 


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1 qualified employer plan (as defined in section 

2 72(p)(4)) or under any contract referred to in 

3 section 72(p)(5). 

4 ‘‘(B) ELIGIBLE STUDENT.—The term ‘eli5 gible student’ has the meaning given such term 

6 by section 25A(b)(3). 

7 ‘‘(C) DEPENDENT.—The term ‘dependent’ 

8 has the meaning given such term by section 

9 152 (determined without regard to subsections 

10 (b)(1), (b)(2), and (d)(1)(B) thereof). 

11 ‘‘(2) EARNED INCOME.—The term ‘earned in12 come’ shall have the meaning given such term in 

13 section 32(c)(2), but such term shall not include any 

14 amounts paid or incurred by an employer for stu15 dent loan payment assistance to an employee. 

16 ‘‘(3) EMPLOYEE.—The term ‘employee’ in17 cludes, for any year, an individual who is an em18 ployee within the meaning of section 401(c)(1) (re19 lating to self-employed individuals). 

20 ‘‘(4) EMPLOYER.—An individual who owns the 

21 entire interest in an unincorporated trade or busi22 ness shall be treated as his own employer. A part23 nership shall be treated as the employer of each 

24 partner who is an employee within the meaning of 

25 paragraph (3). 


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1 ‘‘(5) ATTRIBUTION RULES.— 

2 ‘‘(A) OWNERSHIP OF STOCK.—Ownership 

3 of stock in a corporation shall be determined in 

4 accordance with the rules provided under sub5 sections (d) and (e) of section 1563 (without re6 gard to section 1563(e)(3)(C)). 

7 ‘‘(B) INTEREST IN UNINCORPORATED

8 TRADE OR BUSINESS.—The interest of an em9 ployee in a trade or business which is not incor10 porated shall be determined in accordance with 

11 regulations prescribed by the Secretary, which 

12 shall be based on principles similar to the prin13 ciples which apply in the case of subparagraph 

14 (A). 

15 ‘‘(6) UTILIZATION TEST NOT APPLICABLE.—A 

16 student loan payment assistance program shall not 

17 be held or considered to fail to meet any require18 ments of subsection (d) (other than paragraphs (4) 

19 and (8) thereof) merely because of utilization rates 

20 for the different types of assistance made available 

21 under the program. 

22 ‘‘(7) DISALLOWANCE OF EXCLUDED AMOUNTS

23 AS CREDIT OR DEDUCTION.—No deduction or credit 

24 shall be allowed to the employee under any other 

25 section of this chapter for any amount excluded from 


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1 the gross income of the employee by reason of this 

2 section.’’. 

3 (b) CONFORMING AMENDMENTS.—Sections 

4 221(d)(2)(A), 414(n)(3)(C) and (t)(2), 3121(a)(18), 

5 3306(b)(13), 3401(a)(18), and 6039D(d)(1) of such Code 

6 are each amended by inserting ‘‘127A,’’ after ‘‘127,’’. 

7 (c) CLERICAL AMENDMENT.—The table of sections 

8 for part III of subchapter B of chapter 1 of such Code 

9 is amended by inserting after the item relating to section 

10 127 the following new item: 

‘‘Sec. 127A. Student loan payment assistance programs.’’. 

11 (d) EFFECTIVE DATE.—The amendments made by 

12 this section shall apply to taxable years beginning after 

13 the date of the enactment of this Act. 

Æ 


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