On November 14, businesses in Washington, DC, who are not in compliance with the area’s commuter benefits law, will be subject to fines.
Here are some FAQs on the commuter benefits law, and information on how you can get help if you need to comply.
What is the DC commuter benefits law?
The DC Commuter Benefits Law requires all companies with 20 or more employees to offer commuter benefits for transit to their employees. The law includes nonprofits.
It was passed to help improve air quality and reduce carbon emissions by getting D.C. area commuters to opt for taking public transportation or biking to work instead of driving alone.
If you don’t have a commuter benefits program yet, or need to make sure your program is in full compliance with the IRS regulations, download the DC toolkit below:
What are Commuter Benefits?
Commuter benefits are tax-free fringe benefits authorized by the Internal Revenue Code. The benefits allow employees to pay for certain commuting costs using pre-tax money. In 2020, employees can save up to $270 per month. Employees can save up to 40 percent on commuting expenses.
What options exist for employers to comply with the law?
Employers have three options of how they can offer a Transit Benefit Program:
Employee-paid pre-tax benefit – Allow employees to set aside income on a pre-tax basis to cover the cost of commuting by mass transit or vanpools, up to $265 a month.
Employer-paid direct benefit – Offer a tax-free subsidy for transit up to $265 per month and for bicycling up to $20 per month.
Employer-provided transportation – Provide shuttle or vanpool service at no cost to employees.
Can a company comply by using a combination of the above?
Yes, companies can combine an employee-paid benefit with an employer-paid subsidy to make the IRS limit of $270.
What are the penalties for non-compliance?
Each month that a business is not in compliance could mean a $100 fine for each employee not covered for the first offense. Future offenses include $200 per employee for the second offense, $400 per employee for the third offense, and $800 for each subsequent offense.
What are considered eligible commuting expenses?
The pre-tax commuter benefit covers:
- Transit (subway, train, bus, ferry)
- Ridesharing (Uber Poll and Lyft Shared)
Where can I get more information on how to set up a commuter benefits program at my business?
If you want to learn more about commuter benefits, download the 101 Guide below: