January 3, 2017
Employers in a growing number of cities must offer qualified pre-tax transportation benefits their workers.
Commuter benefits are employer-provided voluntary benefit programs authorized under Internal Revenue Code Section (IRC) 132(a) that allow employees to reduce their monthly commuting expenses. Initially introduced in the IRC in 1993, commuter benefits programs are intended to reduce traffic congestion and pollution. Amounts that can be excluded from gross income are subject to monthly maximum caps under the IRC, which is $255 per month in 2017.
At least eight states – California, Colorado, Connecticut, Delaware, Georgia, Maryland, Minnesota, and Washington – have passed legislation incentivizing employers to offer commuter benefit programs and a growing number of cities have passed mandatory commuter benefit ordinances that require employers to offer pre-tax commuter benefit programs.
Cast & Crew assists our clients with their compliance efforts by making pretax payroll deductions and remitting the amount deducted back to the client via their payroll invoice. Production typically handles employee enrollment, while a third-party administrator provides benefit services. The New York City Consumer Affairs website maintains a list of third party administrators. At this time, Cast & Crew is unable to make payments directly to third-party commuter benefit administrators.
District of Columbia (effective Jan. 1, 2016)
Employers with at least 20 employees are required to provide pre-tax transportation benefits that include:
- A pre-tax fringe benefit, most often administered through a commuter flexible spending account; or
- An employer-paid benefit program in which the employer supplies the employee’s choice of a transit pass or reimbursement of vanpool or bicycling costs up to the value of a transit pass; or
- Employer-provided transportation at no cost to the employee in a vanpool or bus operated by or for the employer
An employee is defined as any individual employed by an employer, regardless of hours of service. Any employer that does not provide commuter benefits after Jan. 1, 2016, will be subject to penalties ranging from $50 to $2,000 for the first offense.
New York City (effective Jan. 1, 2016)
Employers with 20 or more employees must offer full-time employees the opportunity to use pre tax income to purchase qualified transportation benefits other than parking. Any full-time employee of a covered employer who averages at least 30 hours of work per week is eligible for the benefit. The law specifies that if the number of workers drops below 20 full-time employees, the benefit must be continued for the remaining eligible employees for the duration of their employment. Additional features of the law include:
- Employers whose employees are covered by a collective bargaining agreement (CBA) are exempt from the law; however, if the employer has 20 or more full-time employees who are not covered by the CBA, the employer must offer these employees commuter benefits.
- Employers must also create and retain records for two years that demonstrate that (1) all eligible employees are offered transportation benefits and (2) indicate whether employees accepted or declined
- Employers will be allowed a six-month grace period in which to comply, after which penalties will be assessed for a first violation carries a penalty of between $100 and $250.
San Francisco Bay Area (effective 2009)
Employers in the Bay Area – which includes Berkeley, Richmond and nine counties in the region – with 20 or more employees nationwide (10 or more in Richmond and Berkeley) must offer employees:
- Participation in payroll-deduction programs that allow employees to pay for transit passes or vanpool expenses using pre-tax dollars; or
- Employer-paid public transit pass or reimbursement for equivalent vanpool charges; or
- Free transportation on employer-funded buses or vans; or
- Combination of payroll-deduction programs, employer-paid transit passes or vanpool reimbursement, or employer-funded buses or vans
For further information, please contact LaborCompliance@castandcrew.com.
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The proceeding information is provided for informational purposes only, should not be construed as or relied upon as legal advice and is subject to change without notice. If you have questions concerning particular situations, specific payroll administration or labor relations issues, please contact your counsel.