"My son seems to think that by providing a receipt of 529 payments (I made) to the University, that he can take that and file it as "paid education" and get "reimbursed" from his employer."
Yes, he can and should. There's nothing unethical about taking the money**. Family money was used to pay the tuition. It does not have to be "his" money, unless the employer's plan has such a restriction. Even then it's probably still OK. If you are the owner of the 529 plan and your son is the beneficiary, the money in the plan is his money, too.
** Tax wise , there is a problem. You cannot double dip on the tax benefits. If your son is getting tax free reimbursement (employer plans are allowed to pay up $5250, per year, in tax free reimbursement), you cannot also count the same tuition to claim the earnings exclusion on the 529 distribution. One of you has to pay tax on the money you received. It should probably be you, since you will only have to pay tax on the earnings portion of the distribution.
