A primer on commuter benefits
Commuter benefits are a great resource for employees who need to commute to work. If you’re thinking about adding commuter benefits to your company’s list of benefits, here is some information on how it works.
How employees and employers save money
Commuter benefits are a pre-tax program that allows employees and employers to save money. For employees, commuters set aside money in their paychecks tax-free every month to pay for commuting costs. Those savings mean employees pay less in tax on those earnings. The current limit is $270 per month.
They can spend the money on mass transit, qualified paid parking, or rideshares. The money is paid directly to a transit or parking vendor or set up on a voucher or debit card.
Employers also enjoy significant savings with commuter benefits. Employers save about $40 per month for each employee who participates in the program. That’s because the payroll tax bill goes down as more employees save money tax-free.
If employers have 50 employees participate for 12 months, the business can save over $24,000 annually. Employees can save $700 each year if they set aside the maximum amount of money for transit expenses each month.
How it works under IRS
The IRS administers the law that allows employers to give employees “fringe” benefits. The commuter benefit is considered a qualified transportation benefit under the law. So, any business in the United States can offer commuter benefits by following IRS guidelines. There are existing commuter benefit laws on the books that mandate how programs should be set up locally.
Employers must reimburse employees for transportation after employees produce proof of the expense. Commuter benefits are not taxed.
Commuter benefit regulations
Various states, cities, and other government agencies have enacted commuter benefits laws. Those areas include:
- San Francisco (Businesses with 20 or more employees)
- Berkeley (10 or more employees working 10 hours per week)
- Richmond, CA. (10 or more employees working 10 hours per week)
- Seattle (20 or more employees working 10 hours per week)
- New York City (20 or more full-time employees)
- Washington, DC (20 or more employees)
- New Jersey (statewide; 20 or more employees working 10 hours per week)
- San Francisco Airport (Employees working 20 or more hours per week)
- U.S. Federal Government (Capitol Region commuters)
- Bay Area Air Quality Management District (9 counties; offers four options to employees)
- San Francisco Bay Region (50 or more employees)
If you’d like more information on commuter benefits, visit www.commuterbenefits.com.
