Episode 2: What Is Section 127?

Published September 24, 2026

Here are the subtitles for the video:

(0:00) There's a provision in the tax code that (0:02) lets you give every employee up to (0:04) $5,250 (0:06) a year, and that amount will be (0:08) increasing in the coming years, and it (0:10) is completely tax-free to the person (0:12) receiving the benefit. It has been (0:14) around since 1978, (0:16) although almost nobody uses it because (0:18) it has traditionally only been viewed as (0:20) tuition or student loan reimbursement. (0:23) It's called section 127, educational (0:26) assistance. (0:27) Under a section 127 plan, as of 2026, an (0:31) employer can provide their employees up (0:33) to $5,250 (0:36) per year in educational assistance that (0:39) is completely excluded from the (0:41) employees wages. No federal income tax, (0:44) no social security, no Medicare on any (0:46) of that amount. And for the employer, it (0:49) is outside the payroll tax base and it (0:52) is also a deductible business expense. (0:54) So, why has nobody really used this? (0:58) Well, there's three reasons why. First (1:00) is for the last 30 years, the tax code (1:03) kept expiring and would need to be (1:05) renewed by Congress. So, nobody wanted (1:07) to really put a program around it (1:09) because they didn't know if it was going (1:10) to be around next year. Plus, it was (1:13) written for tuition, which meant it only (1:16) worked if your employees were enrolled (1:17) in school somewhere or they had student (1:19) loan debt. And finally, administering (1:21) the program, which included a written (1:24) plan, the payroll exclusion reports, (1:26) non-discrimination testing, and the 5% (1:28) ownership rule, all took HR and their (1:32) departments time and effort that really (1:35) most people did not want to have to deal (1:36) with. Well, all three of those things (1:39) have now changed. My name is Brett (1:41) Fritz. I built a well and I'd love for (1:44) you to come take a look at how (1:46) implementing a section 127 plan can now (1:49) provide you with a lowmaintenance (1:50) employee benefit that reduces its (1:53) overall cost as your employees gain more (1:55) education.

See what Section 127 could save your team — run the two-minute Fit Check