More cities are requiring employers to offer workers transit benefits. This perk provides advantages for companies, their employees and the location where the mandate is obligatory. Businesses and their human resources teams, especially those in larger cities where public transportation is the main form of transit for workers, should consider this additional bonus for future benefits offerings. Let's take a closer look at employer-provided transit:
More than a voluntary benefit
Although this perk is not mandatory under federal regulations, many larger enterprises located in metropolitan areas offer transit assistance to encourage employees to use public transportation more frequently.
While San Francisco's Commuter Benefits Ordinance, as well as similar programs in Bay Area cities Berkeley and Richmond and in nine counties also in the vicinity, has been around since 2009, other locations are also making these plans mandatory. New York City and Washington, D.C.are the two newest cities requiring employers with 20 or more workers to provide pretax transportation benefits.
New York City and Washington, D.C. now require employers to provide transit benefits for employees.Types of plans
Often, commuter benefits plans are not taxed as ordinary income and are excluded from gross income. In these instances, there is a monthly spending cap under the Internal Revenue Code, Section 132(a). For 2015, the government limits were $130 for transit and $250 for parking expenses. In 2016, the public transportation cap will remain the same, while the latter will increase to $255.
When businesses are deciding whether or not to provide commuter benefits to employees, there are three types of plans they should look into.
- Employer-financed: The company directly pays for the cost of the employee's parking or use of public transportation. This perk is not included in a worker's gross income and companies usually spend up to the tax-free minimum.
- Employee-financed: The worker will predetermine a portion of his or her salary – pretax – to pay for commuting costs, up to the IRS minimum.
- A combination program: A portion is funded as a tax-free fringe benefit and the other is paid for by employees' pretax income.
Commuter plans are a cost-efficient way for organizations to recruit and retain valuable workers. The programs are either not expensive or cost-free, and offer business owners the flexibility of designing their own method. The cost-savings are beneficial for both employees and employers, while the push toward using public transportation instead of cars also helps cities reduce their emissions and congestion.