Transportation Benefits: The Road is Starting to be More Traveled

It looks like we have a new movement afoot, shall I say.  Although under the 2013 U.S. Bureau of Labor Statistics National Compensation Survey  less than six percent of private sector employees have access to subsidized commuting that is available under the Internal Revenue Code.  But this may be changing. Cities are starting to mandate transit benefits to help out employees in that city. The latest is New York City whose Mayor Bill de Blasio signed into law a requirement that employers with 20 or more employees give their full-time New York City employees an option to purchase their transit benefits with pre-tax dollars.  The law was signed on October 20th and is effective January 1, 2016. It does not apply to parking benefits and there are civil penalties.  New York is the third city to enact such legislation. Washington D.C.’s mandate will take effect also in January 2016.  But the first city to do so was, of course, San Francisco, CA.  That ordinance was passed and effective in 2009.  All these cities impose the mandate on employers with 20 or more employees. The purpose of these mandates is to give the employees tax breaks on commuting already worked into the Internal Revenue Code but not readily available unless an employer offers it to them.  For example, according to the organization Riders Alliance if an employee uses the current pre-tax level of $130 per month, the New York City employee could save an average of $443 in taxes each year by buying the Metrocard (cost is $112) through an employer.  If you calculate the benefit out across the board any employee who buys the transit passes through their employer and uses the full $130 could save $514 per year in taxes.  And it doesn’t cost the employer anything either. In fact it could save them money according to Riders Alliance since offering the benefit could save the employer $103 per employee per year using the same $112 Metrocard.

And it may not be just cities who are imposing these mandates.  Air Quality Management Boards are also looking into this type of mandate to reduce traffic and improve air quality.   The first one so far is the San Francisco Bay Area Air Quality Management District.  San Francisco Bay Area employers with 50 or more full-time employees within their district’s geographical boundaries are required to register and offer pre-tax commuter benefits to their employees.  This became effective last month (September 30, 2014).

So be prepared and keep your eyes open as more cities and other entities look at this type of program.  Unfortunately, although the tax law that permits these types of savings is on the federal level, the mandates never comes on the federal level. Unlike other countries who mandate these types of national benefits on the national level the U.S. does not.  The result is that employers will have to work through hodgepodges of separate entities with separate requirements.  Information on each of the mandates is provided below.

New York City

San Francisco (City)

San Francisco Bay Area

Washington D.C

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