KSU IRC 127 Employee Tuition Benefit Plan

KENT STATE UNIVERSITY
SECTION 127
EDUCATIONAL ASSISTANCE PLAN

ARTICLE I

Establishment and Purpose of Plan

1.01 �鶹��ý (university) hereby establishes this Plan for the purpose of providing tax benefits related to the furnishing of educational assistance to eligible current and retired employees in accordance with Policy 6 -09.1 Administrative policy and procedures regarding tuition benefits (tuition benefits policy).

1.02 It is the intention of �鶹��ý that the educational assistance provided under the Plan be eligible for exclusion from a Participant's income to the maximum extent possible under Code Section 127(a). �鶹��ý presently provides, and will continue to provide, to their employees a variety of other benefits, some of which may qualify for exclusion from gross income under provisions other than Code Section 127, including the qualified tuition reduction provisions of Code Section 117(d) and job-related courses deductible under Code Section 162. The educational assistance offered under this Plan is provided in addition to such other benefits, which shall not constitute a part of this Plan.

ARTICLE II

Definitions

2.01 "Educational Institution" means any entity that provides instruction or training that improves or develops the capabilities of an individual, including instruction or training furnished by the university, either alone or in conjunction with other employers, or furnished by third parties including other educational institutions.

2.02 "Benefits" means the value of educational assistance provided by the Employer that is excludable from a Participant's gross income under Code Section 127. Such assistance includes (a) the payment, reimbursement, or waiver of tuition, fees, and similar payments charged by an Educational Institution, and (b) the cost of books, supplies, or equipment that is paid for or incurred by a Participant in taking an Educational Course. Benefits shall not include the payment, reimbursement, or waiver of costs related to (a) tools or supplies which may be retained by the Participant after completion of an Educational Course, or (b) meals, lodging, or transportation incidental to taking an Educational Course.

2.03 "Code" means the Internal Revenue Code of 1986, as amended.

2.04 "Educational Course" means a graduate course taken by the Participant under the university’s tuition benefit policy or other professional development programs, or a graduate course taken by the Participant at another Educational Institution. Educational Courses include graduate-level courses of a kind normally taken by an individual pursuing a program leading to a law, business, medical, or other advanced academic or professional degree. Educational Courses do not include courses that instruct the Participant in any sport, game, or hobby, unless such course is required as part of a degree program.

2.05 "Employer" means �鶹��ý.

2.06 "Participant" means any employee receiving graduate-level benefits under the tuition benefits policy. "Participant" also means any employee taking graduate courses at the university or at another Educational Institution as part of a professional development program.

2.07 "Plan" means the �鶹��ý Section 127 Educational Assistance Plan.

2.08 "Plan Administrator" means the President of �鶹��ý and those individuals within the Office of the President to whom the President has delegated authority for the administration of the Plan.

2.09 "Plan Year" means the 12-month period commencing July 1 and ending on June 30 of the following calendar year.

ARTICLE III

Eligibility

3.01 Every Participant is eligible to receive Benefits under the Plan, subject to the limitations set forth in Article IV below.

3.02 A Participant shall cease to be eligible to receive Benefits on the date that the person is no longer a Participant. If, however, such person is receiving Benefits at the time that the person becomes ineligible, he or she will remain eligible for Benefits under the Plan until the end of the quarter or semester in which eligibility terminates.

3.03 A Participant who resigns or is terminated as an employee of the Employer, or who otherwise ceases to be eligible to receive Benefits under the Plan, is not required to reimburse the Employer for the value of any Benefits provided under the Plan unless otherwise required by the provisions of the tuition benefits policy.

ARTICLE IV

Limitations on Benefits

Any Participant who receives during a Plan Year a scholarship, fellowship, or other financial assistance from any public or private source, including a qualified tuition reduction as defined in Code Section 117(d), shall be entitled to receive Benefits under this Plan for the same Plan Year, but only to the extent that the value of the Benefits supplements but does not supplant the amount of such scholarship, fellowship, or other financial assistance.

4.02 In no event shall a Participant be entitled to receive any Benefits under this Plan in lieu of cash or any other taxable compensation that he or she might otherwise be entitled to receive from the Employer.

4.03 In any Plan Year during which a person is a Participant in the Plan, the Participant shall be eligible to receive Benefits under the Plan up to an amount of $5,250 (or such greater or lesser amount as may be subsequently permitted under Code Section 127).

4.04 The Plan is intended not to discriminate in favor of highly compensated employees (as defined in Code Section 414(q)) as to eligibility to participate in the Plan or Benefit distributions from the Plan, and the Plan will in all respects comply with the requirements of Code Sections 127(b)(2) and (3) and the underlying Treasury regulations. If, in the judgment of the Plan Administrator, the operation of the Plan in any calendar year would result in such discrimination, then such Plan Administrator shall select and exclude from participation in the Plan such Participants as shall be necessary to ensure that, in the judgment of the Plan Administrator, the Plan does not discriminate.

4.05 If any Benefit under this Plan becomes taxable, whether as a result of nondiscrimination tests or payment of Benefits in excess of statutory limits, any employment tax withholding owed with respect to the taxable portion of any Benefit shall be deducted from the Participant's other compensation in the same calendar year in which the Benefit is provided.

ARTICLE V

Plan Administrator

5.01 The Plan Administrator shall have authority and responsibility to take any reasonable actions necessary to control and manage the operation and administration of this Plan under rules applied on a uniform and nondiscriminatory basis to all Participants, including retaining an independent company to perform administrative services such as Plan recordkeeping or Benefit reimbursement.

5.02 The Plan Administrator shall give reasonable notice of the availability and terms of the Plan to such persons who are eligible to be Participants.

ARTICLE VI

Miscellaneous

6.01 All Benefits provided under this Plan, with the exception of fees waived under the tuition benefits policy, shall be funded by the Employer in a manner that the Employer shall deem appropriate.

6.02 This Plan may be amended or terminated at any time by the Employer, provided, however, that any termination or amendment shall not affect the right of any Participant to claim an award for which he or she may have qualified prior to such termination or amendment.

6.03 The Vice President for Finance and Administration shall be responsible for preparing and filing any Federal or State information returns required to report any information concerning the Plan.

6.04 This Plan shall not be deemed to constitute a contract between the Employer and any Participant or to be a consideration or an inducement for the employment of any Participant. Nothing contained in this Plan shall be deemed to give any Participant the right to be retained in the service of the Employer or to interfere with the right of the Employer to discharge any Participant at any time regardless of the effect that such discharge shall have upon him or her as a Participant of this Plan.

6.05 This Plan shall be construed and enforced according to the laws of the State of Ohio, other than its laws respecting choice of law, to the extent not preempted by any federal law.

6.06 This document sets forth the entire Plan. Except as provided in this Plan, no other employee benefit plan, which is, or may hereafter be, maintained by the Employer shall constitute a part of this Plan.

Questions and Answers

The following questions and answers relate to the university's Section 127 Educational Assistance Plan, which is effective for courses that begin on or after July 1, 2002:

What benefits are provided under the Section 127 Plan?

The Section 127 plan is intended to provide favorable tax benefits only. The plan will exclude from taxation graduate-level courses provided by the University to eligible employees, up to a maximum of $5,250 per calendar year. Although most educational benefits currently available to employees are already exempt from taxation under other provisions of the Internal Revenue Code (IRC), the Section 127 plan provides relief from taxation for those employees whose graduate-level educational benefits are not covered under other Code provisions.

Who will benefit under the Plan?

Employees enrolled in graduate-level courses under the tuition benefit policy or other professional development programs that are not job-related will benefit from the Plan. The value of such courses will not be taxed, up to the $5,250 annual limit. Employees enrolled in non-job-related graduate courses taken for professional development at another educational institution are also covered by the Plan and will not be taxed on the value of those courses, subject to the annual limit.

Are Section 127 educational benefits reportable on the Form W-2?

No. The instructions for Form W-2 provide that payments qualifying under a Section 127 educational assistance program are not reportable in box 1 as wages. Only waivers or reimbursements (for non-job-related graduate courses) in excess of the $5,250 annual exclusion limit would be reported on the Form W-2 as taxable compensation, subject to withholding. Accordingly, such excess amounts should be paid through the payroll system.

What are the requirements for a Section 127 Plan?

Section 127 requires that an employer prepare a separate written plan for the exclusive benefit of its employees to provide such employees with educational assistance. In addition, eligible employees must be provided reasonable notification of the availability and terms of the plan and the plan must not discriminate in favor of highly compensated employees. Section 127 does not require the educational assistance program to be funded.

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