Not sure what to do with your commuter benefit funds? We’ll tell you.
Starting in January 2022, employees who receive commuter benefits will be able to spend up to $280 per month from their paychecks as a pre-tax deduction or company subsidy. That can add up to a lot of money over the year.
That’s why people ask us what happens to commuter benefit funds if they are not all spent in a month or a year. Here’s a look at some of the financial rules regarding commuter benefits.
The commuter benefits rules
In general, IRS fringe benefits laws regulate commuter benefits. Employees can save money tax-free from their paychecks and use it to pay for commuting expenses such as mass transit, qualified parking, or rideshares. Another option is to have the company give the employee a subsidy in their paychecks.
Employers are mandated to offer commuter benefits in several cities, including New York, San Francisco, and the entire state of New Jersey. Each law requires commuter benefits if the employer has a certain number of employees on staff.
Rolling over unused funds
Various plans can have different rules. In general, if a commuter does not use up all their funds in a given period, the amount of money is carried over to the next period. Commuters can carry over the funds from one month or year to the next.
But according to the IRS, unused funds cannot be returned to commuters. There is also the possibility fees could apply to any rollovers as well.
What if an employee leaves a job
Another similar situation happens when employees decide to leave the company but have a commuter benefits account. Employees are no longer eligible for the commuter benefits program. There’s also the possibility a deadline might be set for the employee to use their pre-tax dollars before they lose them.
While commuter benefits are easy to use, it helps to have an experienced partner to ensure all the IRS, state, and local guidelines are followed. Edenred Benefits has more than 35 years of experience and works with clients across the United States.
Would commuter benefits be a good fit for you and your employees? Book a meeting with us so we can help you find the best option for you.