Conference 7.286::digital

        Slight Aside:
        
        I heard about the new IRS rule about taxing tuition reimbursements
        last January when it took effect.
        
        I think the problem is with the IRS getting too gready for
        every penny they can scrape up.  I don't expect DEC to cover
        every new point in the tax laws.  I just heard that they may
        start taxing my Plan A company car at a value of about $5k
        a year ($15k/3 yrs).
	
        Ouch! That hurts!
        
      -&Mike

    I got a mail message suggesting that I delete or modify this posting,
    which I do not plan to do.  The suggestion stated "the principle at
    stake is that contributors ought to only post what reflects their own
    views"  and commented "if, in fact, you don't agree with the anonymous
    flamer, then I don't know your motivation for posting the note."
    
    First, I disagree with the statement that "contributors should only
    post what reflects their own views" since there might be questions
    raised about issues on which the contributor has not formed views,
    or wishes insight from examining the perspective of others.
    
    I actually posted the note primarily to see what discussion, if any,
    would ensue.  I see several points which relate to Digital's business
    and management style involved either explicitly or implicitly. 
    
    One is the handling of benefits.  Are the tuition reimbursement
    program and the relocation program really similar or are they
    essentially different (my own views follow)?  Another is the response
    from Personnel.  Obviously, from the comments of both the original
    flamer and the Desperado editor, the Personnel response clashed
    in some form or degree with a view of the Corporate environment
    held by the authors of the quoted piece.  I particularly felt that
    the editorial comment was worthy of discussion in this forum, as
    a perception by one employee of Corporate direction in the area
    of employee relations.
    
    Okay, my own views on the specific issue of IRS withholding and
    Digital's policy regarding tuition reimbursement and relocation. At
    first it seemed to me that there was a valid complaint because the sum
    actually received by the employee was unexpectedly reduced, and the
    relocation policy does provide a precedent concerning corporate
    adjustment for IRS idiosyncracies.  But on reflection I decided that it
    does make sense for the company to control costs (giving money away in
    the form of the withholding adjustment is a cost whatever the
    magnitude).  And there is an essential difference between the
    relocation policy and the tuition reimbursement that provides a reason
    for the company to handle them differently.  Relocation is sometimes
    voluntary, sometimes involuntary, but always is justified by filling a
    corporate need - thus it is reasonable that the corporation not require
    the relocating employee be penalized by IRS policy.  On the other hand,
    college tuition reimbursement does not directly address an immediate
    corporate need and thus there is no reason for the corporation to
    expend stockholders' funds to reimburse the employee's tax liability.
    I'm not sure but I think that there are still cases in which there
    is not tax liability on the part of the employee (if the educational
    expense is truly job-related) but even in such cases that would
    be a matter between the employee and the IRS not really involving
    Digital.
    
    Incidentally, I fell discussion of Personnel's response to the
    employee's inquiry and editorial reaction is probably worthy of
    considerable discussion.  For now I will point out that Personnel did
    not satisfy the employee's concern and in fact may have aggravated it.
    Since the original poster was anonymous we cannot establish the true
    facts but it does seem likely that the irritation caused by the IRS was
    compounded rather than defused by the reaction from Personnel. 
    
re .1 - I would expect that Digital should make some effort to shelter
    employees from tax liability incurred because of use of a company car.
    From the discussion elsewhere in this file I understand that employees
    do *not* have *free* use of the car - and it is addressing an immediate
    need of the corporation to ensure that field personnel have necessary
    transportation.
    
    On a more general note, what importance do benefits play in the
    total compensation package?  A few years ago we had a salary freeze,
    were benefits programs impacted too or did they continue unaffected?
    And in such a situation which is *RIGHT*, to also reduce benefits
    costs or to maintain such programs at a full level?

As of the 6-Feb-84 update of the Education and Training Courses section
(6.13) of the Personnel Policies and Procedures manual, there are 4
levels of course support, which are:

1.  Required by one of Digital's critical workforce needs.
2.  Job-required.
3.  Career-related.
4.  Knowledge/Perspective Broadening.

These are related to, if not exact copies of, some IRS categorizations.

Categories 1 and 2 were listed as:

"
Digital pays for:
	all expenses (tuition, books, travel, etc.)
	---
  	courses may be taken on company time.
"

The underlining is present in the policy.

Category 3 was listed as:

"
Digital pays for:
	only tuition, books (limit of $30 per course) and registration
	----
	fees; courses may not be taken on company time.
"

Category 4 was listed as:

"
Digital pays for:
	50% of tuition only (to maximum of $300/year); courses may not
								   ---
	be taken on company time.
"

It is possible that there is a difference between 1&2, and 3, as far
as tuition goes, though it seems doubtful.  There have been one or two
policy updates which I do not have access to, so this may have changed.

While I would think that tuition reimbursement is highly centralized
(as opposed to individuals not interpreting shift differential policy
uniformly), it would still make sense to obtain an up-to-date copy of the
policy, and see what it says.  A disadvantage of posting random excerpts
from private wailing lists in this conference is that participants have no
way of knowing whether their advice is getting back to the aggrieved
parties.  This is only important if they want to pursue the matter further,
of course.

Re .2:

>   On the other hand,
>   college tuition reimbursement does not directly address an immediate
>   corporate need and thus there is no reason for the corporation to
>   expend stockholders' funds to reimburse the employee's tax liability.

As far as the Philosophy preface of the policy is concerned, Digital does
benefit from compensating employees for training.  They are not just
doing it to be nice guys.  In fact, courses which satisfy "Critical
workforce needs" were defined as:

"
A severe shortage of qualified people identified by the Operations
Committee member in charge of the function.
"
				/AHM

Extracts from two memos pertinent to this discussion follow:

14 November 1985
From: Maureen Arnott 
Corporate Personnel

"EXPIRATION OF SECTION 127 - EMPLOYEE EDUCATION ASSISTANCE

Education reimbursement payments made to employees for many courses which
currently are exempt from tax withholdings will become subject to
withholdings beginning January 1, 1986, with the scheduled expiration of
Internal Revenue Code section 127 on December 31, 1985.  Section 127 allows
up to $5,000 per year of educational assistance to be excluded from an
employee's income.  At this time, it does not appear that the law will be
extended.

Under Digital's present education policy, some "Career-Related" courses and
all "Knowledge/Perspective Broadening" courses will be subject to tax
withholdings.  Education defined as "Critical Workforce Needs", "Job
Required" and some "Career-Related" courses will not be affected.

Digital will be required to withhold taxes from reimbursement payments made
to those employees for courses determined "taxable".  Therefore, January 1,
1986, tuition reimbursements identified as "taxable" on the Application for
Education and Training form will be processed through the Corporate Payroll
System.  Only payments identified as "non-taxable" will be processed through
other disbursement entities.

23 January 1986
From: PERSONNEL

"...please ensure that the following information is included on the
Application for Education and Training in the appropriate space (see
attached) prior to sending to Personnel:

	o employee's paysite
	o employee's wage class
	o designation as to whether the particular course is taxable
	  or non-taxable

The attached definitions will assist you in determining if a course
is taxable or non-taxable.
.
.
.
External courses which are considered NON-TAXABLE include:

o Any course that relates to the employee's general duties within
his/her current field of business (i.e. finance, engineering,
management) that will either maintain or improve performance or
skills, as long as it does not qualify the employee for a change
in field or career.

o Any course which the employee's manager expressly requires in
order for the employee to maintain his/her established employment
relationship, status or rate of compensation, as long as it does
not qualify the employee for a change in field or career.

External courses which are considered TAXABLE include:

o Any course or degree program which prepares the employee for a 
position with a new field or business.

o Any course required to satisfy the minimum educational requirements
for an employee's new job or other trade or business."

(Examples were given)

	re .3:
	
>	4.  Knowledge/Perspective Broadening.
>
>Category 4 was listed as:
>
>"
>Digital pays for:
>	50% of tuition only (to maximum of $300/year); courses may not
>								   ---
>	be taken on company time.
>"
	What exactly would be covered by this? Would Digital
	compensate me, say, for a course on music composition at
	Berklee?
	
	Mike_always_looking_to_be_broadened

    re .5:
    
    "Knowledge/perspective broadening"
    
    POLICY DEFINITION:
    
    Courses that result in a general broadening of the employee's 
    business focus. (Hobby and recreational courses/lessons are
    NOT covered).
    
    Sorry, Mike!
    
    :^)

    
    see topic 211 for the "good news"...