CCPA2024-1 — Whether payments and reimbursements to employees pursuant to an employer-provided educational assistance program constitute earnings for purposes of applying the CCPA limitations on wage garnishment

U.S. Department of Labor Wage and Hour Division
Washington, DC 20210
CCPA2024-01
December 18, 2024
Dear Name*:
This letter responds to your request for an opinion concerning whether fringe benefits such as
payments and reimbursements to employees pursuant to an employer-provided educational
assistance program under Section 127 of the Internal Revenue Code (“IRC Section 127”)
constitute earnings for purposes of applying the Consumer Credit Protection Act’s (CCPA)
limitations on wage garnishment. We conclude that, as outlined below, such payments and
reimbursements do not constitute earnings for purposes of the CCPA’s limitations on wage
garnishment.
This opinion is based exclusively on the facts you have presented. You represent that you do not
seek this opinion for any party that the Wage and Hour Division (WHD) is currently
investigating or for use in any litigation that commenced prior to your request.
BACKGROUND
In your request, you ask whether an employer’s reimbursement or payment in kind of up to
$5,250 in educational benefits constitutes earnings under the CCPA. You stated that the benefits
paid “are not related to level of employee pay, services, or performance.” You also spoke with
WHD staff about your concerns and provided additional information about the educational
benefits provided pursuant to a program under IRC Section 127. In general, if such educational
benefits do not constitute earnings for purposes of the CCPA’s limitations on wage garnishment,
an employee subject to a garnishment order and to whom those limitations apply will have lower
overall earnings under the CCPA and may have a smaller amount garnished from their pay.
We note that employers may provide employees up to $5,250 in tax-free educational assistance,
including in the form of tuition payments or reimbursements, under IRC Section 127.
0F
1
Internal
Revenue Service (IRS) guidance provides that payments may be for undergraduate or graduate
level courses that do not have to be work-related. IRS guidance also provides that employees do
not have to report such assistance as compensation and employers should not include covered
assistance in reporting on employee wages, tips and other compensation.
1
Internal Revenue Service, Frequently asked questions about educational assistance programs,
https://www.irs.gov/newsroom/frequently-asked-questions-about-educational-assistance-
programs (last reviewed October 23, 2024).

GENERAL LEGAL PRINCIPLES
The CCPA, among other things, limits the amount of an individual’s disposable earnings that
may be garnished. See 15 U.S.C. § 1673; 29 C.F.R. § 870.10–.11.1F
2
The CCPA defines
“earnings” and “disposable earnings.” 15 U.S.C. § 1672. “Earnings” are “compensation paid or
payable for personal services, whether denominated as wages, salary, commission, bonus, or
otherwise, and includes periodic payments pursuant to a pension or retirement program.” 15
U.S.C. § 1672(a). “Disposable earnings” are “that part of the earnings of any individual
remaining after the deduction from those earnings of any amounts required by law to be
withheld.” 15 U.S.C. § 1672(b).
The compensatory nature of the payment, i.e., whether the payment is for services provided by
the employee is determinative under 15 U.S.C. § 1672(a). “Congress defines the only test as
whether the payment is ‘compensation paid or payable for personal services.’” United States v.
Ashcraft, 732 F.3d 860, 863 n.4 (8th Cir. 2013) (quoting 15 U.S.C. § 1672(a) and discussing
Kokoszka v. Belford, 417 U.S. 642, 651 (1974)).
OPINION
Based on the information provided, payments and reimbursements to employees pursuant to
employer-provided tax-free educational assistance programs under IRC Section 127 are not
earnings under the CCPA and therefore are not included when applying the CCPA’s garnishment
limitations.
2F
3

To determine whether payments and reimbursements pursuant to an educational assistance
program are subject to the CCPA’s limits on garnishment, one must determine whether the
payments constitute “earnings.” As noted, the CCPA defines “earnings” as “compensation paid
or payable for personal services.” 15 U.S.C. § 1672(a). Accordingly, in resolving this issue “the
central inquiry for WHD is whether the employer paid the amount in question for the employee’s
services.” WHD Op. Letter CCPA2018-1NA at 4 (Apr. 12, 2018). Moreover, the types of
payments expressly identified as examples of earnings by the CCPA—wages, salaries,
commissions, and bonuses—“relate in some degree to the amount or value of an employee’s
services” and “normally reward employees for their accomplishments, their amount or length of
2
The CCPA defines “garnishment” as “any legal or equitable procedure through which the
earnings of any individual are required to be withheld for payment of any debt.” 15 U.S.C.
§ 1672(c).
3
This opinion addresses only payments and reimbursements for educational benefits provided
pursuant to a program under IRC Section 127. Your initial request also referenced several other
types of fringe benefits unrelated to educational benefits. While the same legal principles would
apply, we do not have sufficient information to conclude whether these other types of benefits
would constitute earnings under the CCPA.

service, or their contributions to the enterprise.” WHD Op. Letter CCPA2019-1 at 3 (Sept. 10,
2019).
The information that you provided indicates that the payments and reimbursements to employees
you question are pursuant to an employer-provided educational assistance program under IRC
Section 127 that do not constitute earnings for purposes of the CCPA’s limitations on wage
garnishment. Other than requiring a certain number of hours worked to be eligible, the program
and its benefits are generally available to employees without regard to their salary or wage level,
the quality of their work, or the quantity of their work. To receive benefits from the program, the
employee need not take courses that are work-related,3F
4
and, as such, the benefits would not
necessarily aid an employee in improving performance in a current position or advancing to a
new position. Instead, receipt of benefits depends on whether an employee takes courses and
participates in the program. Moreover, the amount of payment or reimbursement does not
depend on the employee’s compensation or other factors relating to the employee’s work
performance; instead, that amount depends on the scope of the courses taken by the employee
subject to generally applicable limits under IRC Section 127.
For these reasons and based on our understanding of educational assistance programs under IRC
Section 127, employer payments and reimbursements to employees pursuant to such programs
are not earnings as defined by the CCPA. Therefore, the employer should not include such
payments and reimbursements when calculating the employee’s disposable earnings for purposes
of determining the maximum amount of an employee’s pay that may be garnished under the
CCPA.
We trust that this letter is responsive to your inquiry.
Sincerely,
J
essica Looman
Administrator
*Note: The actual name(s) was removed to protect privacy in accordance with 5 U.S.C.
§ 552(b).
4
Under IRS guidance, to qualify as a tax-free educational assistance program, the program must
be available for courses that are not work-related and not favor employees by income level.