IRS Rules

General Program Policies
Employer-Sponsored Scholarship Programs

An employer-sponsored scholarship administered by the Scholarship Foundation must meet the IRS guidelines for employer-related programs and the percentage test (below).

IRS guidelines for employer-sponsored scholarship programs

  • The program must not be used to recruit or induce employees to continue their employment.
  • The selection committee must be comprised of individuals totally independent and separate from the employer. The members may not be employees or former employees and should be knowledgeable in the educational field.
  • Potential recipients must be able to meet the admission requirements of and attend an eligible post-secondary institution.
  • Recipient selection must be based on objective standards that are unrelated to employment of the recipient or to the employer’s line of work.
  • Once awarded, a scholarship may not be terminated if the employee is no longer employed.
  • The courses of study for which the scholarship is available must not be limited to those that would benefit the employer.
  • Eligibility requirements must be related to the purpose of the scholarship program.
  • If a minimum period of employment is required to qualify for the employer-sponsored scholarship, this period may not exceed three years.

Percentage Test

The Scholarship Foundation uses an Internal Revenue Service percentage test to ensure compliance to rules and regulations regarding employer-related scholarship programs.

  • Number of awards may not exceed 10% of the number of employees who are eligible, were applicants for the scholarship, and were considered by the selection committee.
  • Number of awards may not exceed 25% of the number of employees’ dependents* who are eligible, were applicants for the scholarship, and were considered by the selection committee.
  • Number of awards may not exceed 10% of the number of employees’ dependents* who could apply (this figure should include dependents who do not apply.)

If you have additional questions about employer-sponsored scholarship funds, please contact Raissa Smorol, Director of Development, by phone (805) 687-6065 or email [email protected].