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calendar year to provide educational assistance permitted by Section 127. For purposes of calculating
the amounts paid or expenses incurred (including, for this purposes, the cost of tuition that would have
been paid for courses taken at APUS) by APUS that count toward this $5,250 limit, APUS will include
amounts paid (if any) for the same employee under the APUS policy for Tuition Reimbursement &
Continuing Education Benefits for Employees – Master’s Level Courses. Consistent with Section 127, the
following items are not eligible for exclusion from an employee’s gross income under the Section 127
Plan:
• costs or payments for education or training in sports, games or hobbies, unless directly
related to the employee’s work responsibilities for APUS; and
• costs or payments for, or the provision of, either (a) tools or supplies that may be retained
by the employee after completion of a course of instruction; or (b) meals, lodging or
transportation.

The Section 127 Plan is intended to benefit APUS’s employees in general; and shall not discriminate in
favor of officers or highly compensated employees of APUS. The Section 127 Plan will not be considered
discriminatory merely because any educational assistance that is available under the Section 127 Plan to
a non-discriminatory class of employees is utilized to a greater degree by officers or highly compensated
employees included in that class.

Separate from the Section 127 Plan, it is APUS’s general intention that, to the extent that benefits
provided in this document cannot be excluded from the employee’s gross income under Section 127,
whether because they exceed $5,250 or are benefits that cannot be provided under Section 127, they
will be separately provided as benefits that can be excluded from the employee’s gross income as
working condition fringe benefits. The decision as to whether such benefits can be excluded as working
condition fringe benefits will be made by APUS, including based on the APUS Continuing Education
Questionnaire and Continuing Education Application. The analysis of whether educational expenses
qualify as working condition fringe benefits will be done on a course by course basis, and not on a
program level basis. Generally speaking, educational expenses for specific courses may qualify as a
working condition fringe benefit where (i) the education maintains or improves skills needed in the
employee’s job, or (ii) the education is required by the employer or by law for the employee to keep his
or her present salary, status, or job, and serves a bona fide business purpose of the employer. However,
even if the education meets one or both of those tests, it is not qualifying education if it is needed to
meet the minimum educational requirements of the employee’s present trade or business, or is part of
a program of study that will qualify the employee for a new trade or business.

To the extent that any employee receives from APUS any educational assistance benefits under this
document that cannot be excluded from the employee’s gross income under Section 127 or as working
condition fringe benefits, such benefits shall be subject to federal income tax and payroll tax
withholding in accordance with federal and state law unless another specific exemption applies. An
employee shall be responsible for any income tax liability arising from his or her receipt of educational
assistance benefits under this document, whether or not APUS withheld tax on those benefits.

An employee seeking educational assistance under this document must comply with all applicable rules
and procedures, including but not limited to eligibility rules and approval and reimbursement
procedures, as set forth in this document and other applicable policies and procedures of APUS. APUS
reserves the right to amend, revise, or terminate the policies and procedures set forth herein at any
time.

Employee Handbook, Revised January 2019 15