Commuting to and from work daily can be quite a headache and consume a lot of valuable time, especially for employees who live near or travel into a big metro area. With the average commute at 26 minutes, it takes nearly an hour each day to get to and from your place of employment. Consider, too, that an estimated 76% of U.S. workers travel to their place of work every day, trying to avoid traffic jams, find parking, or catch the train or bus on time. It creates a lot of stress and can also cost a lot of money.
Fortunately, many employers offer a Commuter Benefits plan as part of their benefits package, which can provide some much-needed financial relief and alleviate employee stress caused by their daily commute. Employees participating in the benefits plan can find valuable tax savings on contributions set aside for qualified travel expenses to and from their job site.
Employers can offer one of these tax-advantaged plans in most U.S. cities and states. However, certain employers must offer a Commuter Benefits plan for their workforce in a handful of locations across the country. Find out more below.
What are Commuter Benefits?
Commuter Benefits are a tax-advantaged benefit plan sponsored by employers to help employees defray some of the costs associated with getting back and forth to work each day. Qualified parking and transit expenses can include:
- Fare for bus, rail, or ferry
- Parking near bus, rail, or ferry stations
- Fare for qualified vanpool or shuttle vehicles
- Parking expenses for employer-provided parking
Both employers and employees can contribute to the employee’s plan, and unused funds roll over at the end of each month. Plus, with a benefits debit card and mobile app, it’s never been easier for employees to access their benefit dollars and manage their accounts.
Commuter Benefits – Where They Are Required
One state and several municipalities require certain employers to offer a commuter benefit to qualified employees. Requirements vary by location and not all employees are eligible to receive these benefits.
California – Berkeley
Requirement: Employers (excluding governmental entities) with at least 10 employees working an average of 10 hours per week or more in Berkeley, or with offices/outlets in Berkeley.
Plan Options: A pre-tax plan that allows employees to exclude transit, vanpool, or bicycle expenses from their taxable wages; a transit subsidy that equals the value of a local monthly transit pass; or an employer-provided shuttle service.
California – Richmond
Requirement: Private businesses, public agencies, and non-profit organizations that employ 10 or more full-time employees.
Plan options: Employers must offer one of the following options to their employees:
- A program consistent with IRC Section 132(f).
- Employer-provided transit pass or reimbursement for equivalent vanpool charges
- Employer-provided at no cost to the employee in vanpool, bus, or similar multi-passenger vehicle operated by or for the employer; or
- An alternative commuter benefit pre-approved by the City of Richmond
California – San Francisco and the Bay Area
Requirement: Employers in 9 Bay Area counties (Alameda, Contra Costa, Marin, Napa, Santa Clara, San Francisco, San Mateo, Solano, and Sonoma) with an average of 50 or more full-time employees. Eligible employees are those who receive a W-2 form and work at least 30 hours per week during the previous calendar month.
Plan options: A pre-tax commuter plan; an employer-provided transit subsidy; an employer-provided shuttle or vanpool; a telework option at least one day per week; or a commuter benefit that reduces the use single occupancy vehicles
State of New Jersey
Requirement: Employers with at least 20 employees in a New Jersey office, excluding tax-exempt organizations, federal government employees, or employees covered by a collective bargaining agreement, must offer a pre-tax transportation benefit. To be eligible, employees must work at least 10 hours per week.
Plan options: Employers must offer a pre-tax transportation benefit to eligible employees.
New York City
Requirement: Employers with at least 20 full-time, non-union employees must offer a commuter benefits plan. Employees who worked an average of 30 or more hours per week in the most recent four weeks are eligible.
Plan options: Covered employers must offer eligible employees the opportunity to use pre-tax income to purchase qualified transportation fringe benefits other than qualified parking.
Philadelphia, PA
Requirement: Employers with 50 or more eligible employees are required to offer a commuter benefits plan. The law applies to all companies (even if the business isn’t headquartered in Philadelphia) with 50 or more employees working in the city. Employees who work an average of at least 30 hours per week in Philadelphia are eligible.
Plan options: Employers must offer either a pre-tax payroll deduction for mass transit or qualified bicycle expenses or employer-paid benefit covering mass transit
Seattle, WA
Requirement: Employers with at least 20 employees worldwide (including part-time, seasonal, and temporary employees) must offer a commuter benefits plan. Employees must have worked in Seattle an average of at least 10 hours per week in the previous month, regardless of where they live.
Plan options: Employers must offer a monthly pre-tax payroll deduction option for transit or vanpool expenses to eligible employees.
Washington, D.C.
Requirement: Employers with at least 20 employees who perform 50% or more of their work in Washington, D.C., must offer a Commuter Benefits plan. Employees who spend at least half their working time in Washington, D.C., or are based in the city are eligible for the benefit.
Plan options: Employers must offer an employee-paid, pre-tax transit benefit; an employer-paid, direct transit benefit; or, employer-provided transit.
For 40 years, DataPath has been a pivotal force in the employee benefits, financial services, and insurance industries. The company’s flagship DataPath Summit platform offers an integrated solution for managing CDH, HSA, Well-Being, Commuter/Transit, COBRA, and Billing. Through its partnership with Accelergent Growth Solutions, DataPath also offers expert BPO services, automation, outsourced customer service, and award-winning marketing services.