Under section 127 of the IRC, the amount for educational assistance that employees receive from their employers is generally excludable from employees’ gross income. This form and schedule require employers to report information on (1) the number of employees eligible for such assistance, (2) the number of employees who received such assistance, and (3) the value of the assistance provided. Objectives, Scope, and Methodology

Our objectives were to provide information about (1) employer-provided educational assistance, including the characteristics of employers providing educational assistance and employees eligible for and receiving it, and (2) other tax provisions related to employer-provided educational assistance and how they differ from section 127. Characteristics of Employers Providing Educational Assistance

According to IRS, for each of the 3 years we reviewed, employers filed over 3,200 returns that reported information about educational assistance they provided their employees under section 127. These employers provided 99 percent of the dollar amount of section 127 assistance reported to IRS for 1992 through 1994. Undergraduate Students Received More Than Half of Total Section 127 Assistance

According to NPSAS data, 74 percent of full-time employees receiving educational assistance in academic year 1992 to 1993 were undergraduates. Most Undergraduate Recipients Were in Clerical or Technical Occupations, and Most Graduates Were in Professional or Teaching Occupations

Our analysis of the NPSAS data also showed that most undergraduates—about 64 percent (125,000)—worked for private, for-profit employers in clerical or technical occupations, whereas most graduates—about 89 percent (64,000)—were in professional, manager/administrative, or teaching occupations. Comparison of Application and Restrictions of Different Sections

The major differences between section 127 and sections 62, 117, and 132 are related to the type of education being supported, employee eligibility, limits on the value of assistance provided, and the ease of administration. Table 3 summarizes major similarities and differences between Section 127 and the three other tax provisions relevant to employer-provided educational assistance.
Why GAO Did This Study

Pursuant to a congressional request, GAO reported on employer-provided educational assistance between 1992 and 1994 under section 127 of the Internal Revenue Code (IRC), focusing on: (1) the characteristics of employers providing educational assistance, such as the number of providers and their size; (2) employees eligible for and receiving it, such as the number of recipients and their level of study; and (3) other tax provisions related to employer-provided educational assistance and the differences between them and section 127.

What GAO Found

GAO found that: (1) according to IRS data, employers annualy filed over 3,200 returns that reported information about educational assistance they provided their employees during 1992 through 1994; (2) employers filing returns varied in size, type of business, and amount of assistance provided; (3) large employers, those employing 250 or more employees, provided 99 percent of the dollar amount of the reported assistance to 98 percent of the employees who received it; (4) IRS data showed that about 900,000 employees received employer-provided educational assistance annually during 1992 through 1994, but few employees eligible for educational assistance under section 127 actually received it; (5) according to National Postsecondary Student Aid Study data, 74 percent of employees receiving educational assistance in academic year 1992 to 1993 were undergraduates, and about 64 percent of the undergraduates who identified their occupation were in clerical or technical occupations; (6) of employees receiving assistance who were graduate students and identified their occupation, about 89 percent were in professional, managerial, administrative, or teaching occupations; (7) generally, four tax provisions apply to employer-provided educational assistance; and (8) the major differences between section 127 and the three other provisions are related to the type of education supported, employee eligibility, limits on the value of assistance provided, and the ease of administration.