Name: BenefitPlus
Brand: BenefitPlus

Question 1

How much can an employer contribute to student loan repayment tax-free?

Accepted Answer

Under IRC Section 127, employers can contribute up to $5,250 per year per employee toward qualified student loan repayment, completely tax-free for both the employer and the employee. This provision was made permanent by the One Big Beautiful Bill Act (OBBBA) of 2025. There is no cap on total contributions — amounts above $5,250 are treated as taxable wages.

Question 2

What is Student Loan Repayment Assistance (SLRA)?

Accepted Answer

SLRA is a workplace benefit where employers make direct contributions toward employees' existing student loan balances. Under IRC Section 127, these contributions are tax-free up to $5,250 per employee per year.

Question 3

How does an employer student loan repayment program work?

Accepted Answer

An employer student loan repayment program works by having the employer make direct contributions toward employees' existing student loan balances. With BenefitPlus, the employer sets a contribution amount, employees enroll by connecting their loans, and payments are routed directly to loan servicers each pay period.

Question 4

What is Section 127 of the Internal Revenue Code?

Accepted Answer

IRC Section 127 allows employers to provide up to $5,250 per year per employee in educational assistance benefits — including student loan repayment — tax-free. Originally enacted in 1978 for tuition assistance, it was expanded in 2020 to include student loan repayment and made permanent in 2025 by the OBBBA.

Question 5

How long does it take to set up an employer student loan repayment benefit?

Accepted Answer

With BenefitPlus, most employers launch their student loan repayment benefit within 48 hours. Setup includes generating the required Section 127 plan document, configuring eligibility and contribution rules, and inviting employees to enroll.

Question 6

Do employees pay taxes on employer student loan repayment contributions?

Accepted Answer

No — employees pay zero federal income tax and zero FICA tax on employer student loan repayment contributions up to $5,250 per year under IRC Section 127. The full $5,250 goes directly to debt reduction.

Question 7

What is the difference between an SLRA and a salary raise?

Accepted Answer

A Student Loan Repayment Assistance (SLRA) benefit delivers more value per dollar than a salary raise because it's tax-free under IRC Section 127. A $5,250 SLRA delivers the full amount to the employee's loan balance, while a $5,250 raise nets only about $3,430 after taxes — approximately 53% less value.

Question 8

What is BenefitPlus?

Accepted Answer

BenefitPlus is a fully managed employer-sponsored student loan repayment assistance (SLRA) platform. It enables companies of any size to offer tax-free student loan contributions under IRC Section 127, with built-in compliance, direct-to-servicer payments, and W-2 reporting support.

Frequently Asked Questions

Basics

What is Section 127 of the Internal Revenue Code?

Is Section 127 student loan repayment permanent?

How much can an employer contribute tax-free?

Do employers save money on payroll taxes?

Are payments tax-free for employees?

Does the benefit work for both federal and private student loans?

Can the benefit cover both tuition and student loans?

How quickly can a company launch a Section 127 plan?

What exactly counts as a 'qualified student loan' under Section 127?

Can Section 127 funds pay for someone else's loans?

Does the $5,250 limit apply per loan or per employee?

Tax

How does federal vs. state tax treatment differ?

What are the FICA implications for employer and employee?

What happens if the employer exceeds $5,250?

What are the W-2 reporting requirements?

How does this impact employees' tax returns?

How does this interact with other tax-advantaged benefits?

Eligibility

Who qualifies as an 'employee' for Section 127?

Can independent contractors participate?

Can part-time employees participate?

Can new hires participate immediately, or is there a waiting period?

Are there limits on benefits to highly compensated employees?

What does nondiscrimination testing involve?

Setup

What's required to establish a Section 127 plan?

What does the plan document need to contain?

Who can administer the plan — internal HR or a third party?

What are the annual compliance requirements?

What if we need to amend the plan?

What if we need to terminate the plan?

Implementation

Do I need to talk to a salesperson before I can sign up?

How long does setup take?

What payroll integration is required?

Do we need to change our payroll system?

How do employees enroll?

Can employees change their contribution amounts?

What loan servicers are supported?

Coordination

Does Section 127 SLRA affect PSLF eligibility?

Can employees get both SLRA and a 401(k) match via SECURE 2.0 Section 110?

How does SLRA interact with tuition reimbursement programs?

What about employees on federal IDR plans?

Compliance

How does nondiscrimination testing work?

What are the recordkeeping requirements?

What should we expect in an IRS audit?

Does the DOL require any reporting?

Still have questions?