What requirements must an adoption assistance program meet for income tax exclusion?

Author: Alice Gilman

An adoption assistance plan must be a separate written plan that meets all of the following criteria:

  • The plan does not favor highly compensated employees or dependents.
  • No more than five percent of the adoption assistance provided in any year may be paid to shareholders or owners of more than five percent of the stock, capital or profits of the employer on any day during the year.
  • Eligible employees are provided with reasonable notice of the plan.
  • Employees provide reasonable substantiation that payments or reimbursements are for qualifying expenses.