When Congress adopted the Tax Reform Act of 1984, it published a whole list of fringe benefits that could be deducted by companies and not reported as income to employees. Everything from health benefits and life insurance to parking spaces, coffee, and holiday turkeys were included -- but not tuition assistance plans.
Now, it seems, Congress has changed its mind. It recently passed a bill that allows businesses to provide tax-free tuition to their workers at least through the end of this year. There is just one catch: The assistance can't total more than $5,000 per person.
There could be another, more significant catch. Lawmakers have never before imposed a ceiling on fringe benefits, with the exception of retirement plans, so the new limit on tuition has accountants worried. Says Rhonda L. Davis, a supervisor in the national tax department of Ernst & Whinney, in Washington, D.C., "We're afraid that Congress is going to cap other fringe benefits as well." Already there has been discussion within the Reagan Administration about limiting health-care benefits. Under one Treasury Department proposal, a company wouldn't be allowed to pay more than $175 per month per married employee. Anything beyond that amount would be considered taxable income.
Other benefits that could also be capped this year include legal services for employees and expenditures for car-pooling. In addition, Treasury officials have tentatively proposed repealing, not just scaling back, child care, life and group legal insurance, and death benefits to the employee's family. Even if Congress turns thumbs-down on Treasury's suggested cuts, it is clear that the fringe benefits area is due for a major overhaul this year.