This is a reminder to employers that the DOL published opinion letter CCPA2024-01, which addresses whether payments and reimbursements to employees from an employer-provided educational assistance program (EAP) are considered earnings for purposes of the Consumer Credit Protection Act’s (CCPA) limitations on wage garnishments.

• Employers should note that when an employer-sponsored benefit is not related to employee pay or services, it cannot be factored into wage garnishment, as stated in the DOL’s opinion letter published on December 18.

The Opinion Letter Summary:

• Background:
  • The inquiry concerns whether up to $5,250 in educational benefits provided by employers under IRC Section 127 are considered earnings under the CCPA.
  • These benefits are unrelated to the employee’s pay, services, or performance.

• Legal Framework:
  • Under IRC §127, employers may provide employees up to $5,250 in tax-free educational assistance through tuition payments or reimbursements.
  • IRS guidance states that employees do not have to report this assistance as compensation, and employers should not include it in reporting employee wages, tips, and other compensation.
  • The CCPA limits the amount of an individual’s disposable earnings that can be garnished. “Earnings” are defined as compensation for personal services, including wages, salaries, commissions, bonuses, and periodic payments from pension or retirement programs.

• Opinion:
  • The DOL concluded that employee payments and reimbursements pursuant to an employer-provided EAP under IRC §127 are not earnings under the CCPA.
  • These benefits are not compensation for personal services and do not depend on the employee’s work performance or salary.
  • The benefits are generally available to employees regardless of their salary or work quality and are not necessarily work-related.

• Implications:
  • Since these educational benefits are not considered earnings, they are not included when calculating disposable earnings for garnishment purposes.
  • This means employees receiving such benefits may have a smaller amount garnished from their pay.

For additional information: DOL CCPA2024-1

This communication is intended solely for the purpose of conveying information. The present post might incorporate hyperlinks directing readers to websites managed by third-party entities. The inclusion of any links within this communication is meant to serve as points of reference and could encompass opinion articles from various law firms, articles from HR associations, official websites, news releases, and documents of government agencies, and other relevant third-party sources. Vensure has no authority over these external websites and bears no responsibility for their content. Furthermore, Vensure does not endorse the materials present on these websites. The contents of this communication should not be interpreted as legal advice or as a legal standpoint concerning specific facts or scenarios. Nor should it be deemed an exhaustive compilation of facts potentially pertinent to federal, state, or local laws. It is strongly advised that employers solicit legal guidance from an employment attorney when undertaking actions in response to any legal updates provided. This is due to the possibility of future alterations occurring in federal, state, and local laws, regulations, as well as the directives and guidelines issued by governing agencies. These changes may transpire at any given time, potentially rendering certain portions of the content within this update void or inaccurate.