Commuter Benefits: Where They’ve Been, Where They’re Headed

Commuter benefits blog post graphic with roadmap and ordinance timeline infographic

Employer-provided commuter benefits have been around for years, but it’s only recently that legislation in some areas made providing these benefits mandatory for employers of a certain size. In this infographic post, we’ll share a recent history of commuter benefits, some new legislation you should know about, and what you should keep in mind if you’re considering them for your workplace.

What Are Commuter Benefits?

Commuter benefits allow individuals to set aside pre-tax dollars to pay for work-related transportation costs. This pre-tax benefit can cover fare cards, vouchers, and direct payments to the transit operator or participants’ debit cards. The benefits can also cover shared Uber or Lyft rides when used for a work-related commute, and in some cases, participants can use the benefit towards public parking.

Individuals who take advantage of this benefit will reduce their taxable income…but the perks don’t stop there. Employers who offer commuter and parking benefits to their employees can save up to 7.65% on their payroll taxes. And as part of a bigger benefits package, employers who offer the commuter benefit can use it as a way to attract and retain top talent.

A Brief History

Commuter benefits have been around in one form or another since the 1980s, but city-mandated legislation didn’t begin until 2009. Always on the cutting edge, San Francisco, California, was one of the first cities to mandate that employers with 20 employees or more must offer commuter benefits. Berkeley and Richmond were soon to follow in the Golden State, as well as the rest of the Bay Area.

In 2016, both Washington D.C., and the five boroughs of New York City mandated that employers with 20 or more workers must offer commuter benefits.

Recent Legislation

At the end of 2018, Seattle, Washington, passed similar legislation—the Seattle Commuter Benefits Ordinance—to provide fully or partially subsidized transit passes to workers. This ordinance is designed to significantly lower commuting costs—the second highest household cost in the city. Seattle businesses with 20 or more employees will be required to offer the benefit, which will go into effect on January 1, 2020.

And effective immediately, New Jersey employers with 20 or more employees will be required to offer commuting benefits—allowing employees to set aside up to $265 per month to put toward their commuting costs. While many cities have enacted these benefits, New Jersey is the first pass this legislation state-wide.

Check out our infographic below that breaks down the legislation timeline, and what it means for employees and employers.

connectyourcare roadmap to commuter benefits infographic
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Thinking About Offering Commuter Benefits at Your Organization?

If so, there are a few things to keep in mind. For one, these benefits do not have to be pre-taxed, employee paycheck deductions. You can also offer these benefits as a tax-free, employer-paid subsidy. And while the most recent legislation requires employers with 20 employees or more to offer the benefit, there is no minimum to sign up. (Yes, you can sign up even with only 1 employee!)

If your employees are traveling by train, bus, trolley, and even ferry, their commuting costs can be covered by a commuter benefits program. But keep in mind there are a few things that aren’t considered eligible expenses, including taxis, gas or fuel, mileage, single-ride Uber or Lyft rides (must be UberPOOL or Lyft Line to be eligible), car rentals or other business trip costs, residential parking fees, and airport parking fees.

Thinking about enrolling? The good news is you can do so any time during the year.

By |2019-06-11T16:52:37-05:00June 11th, 2019|Commuter Benefits, Employer Posts, Legislation|
Disclaimer: ConnectYourCare does not provide tax or legal advice. This information is not intended and should not be taken as tax or legal advice. Any tax or legal information in this notice is merely a summary of ConnectYourCare’s understanding and interpretation of some of the current tax regulations and is not exhaustive. You should consult your tax advisor or legal counsel for advice and information concerning your particular situation before making any decisions.