‘‘SEC. 127A. STUDENT LOAN PAYMENT ASSISTANCE PRO-
GRAMS. 
‘‘(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 em-
ployee 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 re-
spect 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 PRO-
GRAM.— 
‘‘(1) IN GENERAL.—For purposes of this sec-
tion a student loan payment assistance program is 
a separate written plan of an employer for the exclu-
sive benefit of his employees to provide such employ-
ees with student loan payment assistance which 
meets the requirements of paragraphs (2) through 
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(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 pro-
gram in the case of employees who are not highly 
compensated employees. 
‘‘(2) DISCRIMINATION.—The contributions or 
benefits provided under the plan shall not discrimi-
nate in favor of employees who are highly com-
pensated 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 
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the stock or of the capital or profits interest in the 
employer. 
‘‘(5) NO FUNDING REQUIRED.—A program re-
ferred to in paragraph (1) is not required to be 
funded. 
‘‘(6) NOTIFICATION
OF
ELIGIBLE
EMPLOY-
EES.—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 re-
quirements 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 av-
erage benefits provided to highly compensated 
employees under all plans of the employer. 
‘‘(B) SALARY REDUCTION AGREEMENTS.— 
For purposes of subparagraph (A), in the case 
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of any benefits provided through a salary reduc-
tion agreement, a plan may disregard any em-
ployees whose compensation is less than 
$25,000. For purposes of this subparagraph, 
the term ‘compensation’ has the meaning given 
such term by section 414(q)(4), except that, 
under rules prescribed by the Secretary, an em-
ployer may elect to determine compensation on 
any other basis which does not discriminate in 
favor of highly compensated employees. 
‘‘(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 at-
tained 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 in-
cluded in a unit of employees covered by an 
agreement which the Secretary finds to be a 
collective bargaining agreement between em-
ployee representatives and 1 or more employees, 
if there is evidence that student loan payment 
benefits were the subject of good faith bar-
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gaining between such employee representatives 
and such employer or employers. 
‘‘(d) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section— 
‘‘(1) STUDENT LOAN PAYMENT ASSISTANCE.— 
‘‘(A) IN
GENERAL.—The term ‘student 
loan payment assistance’ means the payment of 
principal or interest on— 
‘‘(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 edu-
cation furnished during a period dur-
ing which the employee was an eligible 
student, or 
‘‘(ii) any indebtedness used to refi-
nance 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 
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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 ‘eli-
gible student’ has the meaning given such term 
by section 25A(b)(3). 
‘‘(C) DEPENDENT.—The term ‘dependent’ 
has the meaning given such term by section 
152 (determined without regard to subsections 
(b)(1), (b)(2), and (d)(1)(B) thereof). 
‘‘(2) EARNED INCOME.—The term ‘earned in-
come’ shall have the meaning given such term in 
section 32(c)(2), but such term shall not include any 
amounts paid or incurred by an employer for stu-
dent loan payment assistance to an employee. 
‘‘(3) EMPLOYEE.—The term ‘employee’ in-
cludes, for any year, an individual who is an em-
ployee within the meaning of section 401(c)(1) (re-
lating to self-employed individuals). 
‘‘(4) EMPLOYER.—An individual who owns the 
entire interest in an unincorporated trade or busi-
ness shall be treated as his own employer. A part-
nership shall be treated as the employer of each 
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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 sub-
sections (d) and (e) of section 1563 (without re-
gard to section 1563(e)(3)(C)). 
‘‘(B) 
INTEREST
IN
UNINCORPORATED 
TRADE OR BUSINESS.—The interest of an em-
ployee in a trade or business which is not incor-
porated shall be determined in accordance with 
regulations prescribed by the Secretary, which 
shall be based on principles similar to the prin-
ciples 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 require-
ments 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 
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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,’’ after ‘‘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. 
Æ 
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