AURORA, Colo. — A respiratory therapist at Children’s Hospital says she had to take a cash advance on her credit card to pay her bills this month, after she got notice from the hospital that she’d have nearly $2,000 withheld from her paychecks this month to pay for taxes on tuition benefits the hospital offered earlier this year.
The therapist, who asked for anonymity for fear of losing her job, was one of several who contacted 9NEWS this weekend following last week's story that the hospital would stop offering fully covered tuition next year because too many people had enrolled to receive the benefit. The news stunned hospital staff, some of whom entered degree programs specifically because of the tuition-free offer.
A group of employees said they received notice from the hospital on Nov. 24 that the extra taxes would be withheld from remaining paychecks in December. The respiratory therapist who interviewed with 9NEWS said the move would withhold an extra $600 from her paychecks for the remainder of the year, making it difficult to pay her mortgage and her young child’s tuition at school.
A spokeswoman for Children’s Hospital Colorado said the tax liability for the education benefits has not changed. She said the liability had been communicated since the hospital began providing the benefit but didn’t share documentation of that with 9NEWS.
She explained tuition benefits are tax free up to $5,250, but the IRS requires any payment beyond that to be taxed as income to the employee.
The notice sent to employees in November said the hospital received an invoice from Guild, the company administering the hospital’s tuition benefit program on Nov. 21. When the hospital received the invoice, it realized it had to withhold the taxes on benefits paid by the end of the year.
The payroll email suggested employees could utilize the hospital’s Hardship PTO payout program to help cover the extra money withheld, secure an education loan to help with the extra costs or tap into their 403(B) savings to pay for the loss.
9NEWS asked Children’s Hospital why the taxes weren’t withheld over a longer period of time, reducing the financial impact to employees. In a statement, the hospital said it sets withholdings only after they’ve been notified of the employee’s enrollment in a class. Guild told 9NEWS it can take anywhere from 3- 5 months to bill the hospital after an employee enrolls in a class.
9NEWS legal expert and employment law attorney Whitney Traylor said if employees were notified of the tax burden up front, it’s hard to argue they don’t have to pay.
But he said he has seen other employers faced with similarly short-noticed tax liability act differently.
“What I generally see is the employer getting it right, paying the tax, making it easy for the employee,” he said. “I mean, and that is good. You know, good employment practices.”
Terminated benefits may spark legal claim
The complaints about taxes charged on the tuition benefits come after the hospital announced it was dropping the fully covered tuition benefits last week. The decision was made during a routine assessment of benefit offerings, the hospital said in a statement to 9NEWS. Children’s said too many people enrolled in the benefit and it was costing the hospital too much.
Traylor said employees who are losing out on future tuition with the hospital’s decision to end the benefit may have a legal claim.
“The analysis is, really, did you have a contract,” he said. “And so here is an employee benefit, or an employee handbook can be deemed an implied contract.”
Traylor said many employers go out of their way to note that benefits don’t indicate a contract, but he said employees may have another action through what’s known in the law as a promissory estoppel.
There are three elements of a promissory estoppel, according to Traylor: An employer makes a promise, employees reasonably rely on that promise and there is a detrimental impact.
Traylor said employees who were already enrolled in and paying for schooling before Children’s Hospital Colorado offered tuition benefits may not have a claim. But any employee who made some sort of life change based on the promised benefit could have a legal claim he said. That could include enrolling in a program in the first place or deciding to move to the area or take a certain job based on the benefit.
More from Steve Staeger:
SUGGESTED VIDEOS: Next with Kyle Clark