Student Loan Employment Benefits Act of 2016

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. Short title This Act may be cited as the Student Loan Employment Benefits Act of 2016 2. Student loan payment assistance programs (a) In general Part III of subchapter B of chapter 1 127A. Student loan payment assistance programs (a) In general Gross income of an employee does not include amounts paid or incurred by the employer for student loan payment assistance provided to such employee if the assistance is furnished pursuant to a program which is described in subsection (c). (b) Limitations (1) Assistance limitation The amount taken into account under subsection (a) with respect to an individual for student loan assistance with respect to student loan payments during a taxable year shall not exceed $5,000. (2) Earned income limitation The amount excluded from the income of an employee under subsection (a) for any taxable year shall not exceed the earned income of such employee for such taxable year. (c) Student loan payment assistance program (1) In general For purposes of this section a student loan payment assistance program is a separate written plan of an employer for the exclusive benefit of his employees to provide such employees with student loan payment assistance which meets the requirements of paragraphs (2) through (9) of this subsection. If any plan would qualify as a student loan payment assistance program but for a failure to meet the requirements of this subsection, then, notwithstanding such failure, such plan shall be treated as a student loan payment assistance program in the case of employees who are not highly compensated employees. (2) Discrimination The contributions or benefits provided under the plan shall not discriminate in favor of employees who are highly compensated employees (within the meaning of section 414(q)). (3) Eligibility The program shall benefit employees who qualify under a classification set up by the employer and found by the Secretary not to be discriminatory in favor of employees described in paragraph (2). (4) Principal shareholders or owners Not more than 25 percent of the amounts paid or incurred by the employer for student loan payment assistance during the year may be provided for the class of individuals who are shareholders or owners (or their spouses or dependents), each of whom (on any day of the year) owns more than 5 percent of the stock or of the capital or profits interest in the employer. (5) No funding required A program referred to in paragraph (1) is not required to be funded. (6) Notification of eligible employees Reasonable notification of the availability and terms of the program shall be provided to eligible employees. (7) Statement of expenses The plan shall furnish to an employee, on or before January 31, a written statement showing the amounts paid or expenses incurred by the employer in providing student loan payment assistance to such employee during the previous calendar year. (8) Benefits (A) In general A plan meets the requirements of this paragraph if the average benefits provided to employees who are not highly compensated employees under all plans of the employer is at least 55 percent of the average benefits provided to highly compensated employees under all plans of the employer. (B) Salary reduction agreements For purposes of subparagraph (A), in the case of any benefits provided through a salary reduction agreement, a plan may disregard any employees whose compensation is less than $25,000. For purposes of this subparagraph, the term compensation (9) Excluded employees For purposes of paragraphs (3) and (8), there shall be excluded from consideration— (A) subject to rules similar to the rules of section 410(b)(4), employees who have not attained the age of 21 and completed 1 year of service (as defined in section 410(a)(3)), and (B) employees not included in a student loan payment assistance program who are included in a unit of employees covered by an agreement which the Secretary finds to be a collective bargaining agreement between employee representatives and 1 or more employees, if there is evidence that student loan payment benefits were the subject of good faith bargaining between such employee representatives and such employer or employers. (d) Definitions and special rules For purposes of this section— (1) Student loan payment assistance (A) In general The term student loan payment assistance (i) any indebtedness incurred by the employee solely to pay qualified higher education expenses (as defined in section 221) which— (I) are paid or incurred within a reasonable period of time before or after the indebtedness was incurred, and (II) are attributable to education furnished during a period during which the employee was an eligible student, or (ii) any indebtedness used to refinance indebtedness described in clause (i). Such term shall not include any payment of principal or interest on indebtedness owed to a person who is related (within the meaning of section 267(b) or 707(b)(1)) to the taxpayer or to any person by reason of a loan under any qualified employer plan (as defined in section 72(p)(4)) or under any contract referred to in section 72(p)(5). (B) Eligible student The term eligible student (C) Dependent The term dependent (2) Earned income The term earned income (3) Employee The term employee (4) Employer An individual who owns the entire interest in an unincorporated trade or business shall be treated as his own employer. A partnership shall be treated as the employer of each partner who is an employee within the meaning of paragraph (3). (5) Attribution rules (A) Ownership of stock Ownership of stock in a corporation shall be determined in accordance with the rules provided under subsections (d) and (e) of section 1563 (without regard to section 1563(e)(3)(C)). (B) Interest in unincorporated trade or business The interest of an employee in a trade or business which is not incorporated shall be determined in accordance with regulations prescribed by the Secretary, which shall be based on principles similar to the principles which apply in the case of subparagraph (A). (6) Utilization test not applicable A student loan payment assistance program shall not be held or considered to fail to meet any requirements of subsection (c) (other than paragraphs (4) and (8) thereof) merely because of utilization rates for the different types of assistance made available under the program. (7) Disallowance of excluded amounts as credit or deduction No deduction or credit shall be allowed to the employee under any other section of this chapter for any amount excluded from the gross income of the employee by reason of this section. . (b) Conforming amendments Sections 221(d)(2)(A), 414(n)(3)(C) and (t)(2), 3121(a)(18), 3306(b)(13), 3401(a)(18), and 6039D(d)(1) of such Code are each amended by inserting 127A, 127, (c) Clerical amendment The table of sections for part III of subchapter B of chapter 1 of such Code is amended by inserting after the item relating to section 127 the following new item: Sec. 127A. Student loan payment assistance programs. . (d) Effective date The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.

Summary: Student Loan Employment Benefits Act of 2016 This bill amends the Internal Revenue Code to exclude from the gross income of an employee up to $5000 per year of the amounts paid by an employer under a student loan payment assistance program. The student loan payment assistance program must be a separate written plan of an employer to provide employees with student loan payment assistance which meets specified requirements. The bill defines "student loan payment assistance" as the payment of principal or interest on any indebtedness incurred by an employee solely to pay qualified higher education expenses which are paid or incurred within a reasonable time before or after such indebtedness was incurred and are attributable to education furnished during a period in which such employee was a student eligible for federal financial assistance. "Student loan payment assistance" also includes the payment of principal or interest on debt used to refinance the debt described above.