Your Quick Guide to Commuter Benefits
Commuter benefits are a super simple way for both employers and employees to save money. Put in place in 1993 to encourage public transportation use, these programs allow for employees to use pre-tax dollars to pay public transportation and parking expenses. For employers, commuter benefits are considered a fringe benefit, not compensation, so the usual 7.65% payroll taxes don’t apply.
Why provide commuter benefits?
Commuter benefits programs are legally required in a growing number of cities. Companies everywhere can reap the rewards of a pre-tax commuter benefits program, but you must offer commuter benefits if you’re an employer:
- In the San Francisco Bay Area with 50 or more full-time employees
- In New York City with 20 or more full-time employees (as of 1/1/2016)
- In Washington, D.C. with 20 or more total employees (as of 1/1/2016)
Ordinances in San Francisco and NYC define full-time employees as anyone working 30+ hours/week. The Washington, D.C. ordinance counts all employees, both full- and part-time.
How does it work?
Commuter benefits funds can be used with many, but not all modes of transportation, and monthly contribution limits are set annually by the IRS.
- Maximum $130/mo.
- Can use for: Buses, trains, subways, ferries, light rail, vanpools
- But not: Fuel, mileage, vehicle costs, carpools, tolls, tickets, taxis
- Maximum $250/mo.
- Can use for: Parking at work or lot at/near public transit used as part of commute
- But not: Parking at home, someone else’s workplace, stops in between home and work, airports or on business trips
Depending on how an employer offers commuter benefits, funds can be delivered to and used by employees in a number of different ways, including:
- Employer or employer-selected provider buying passes, fare cards, vouchers or tokens and mailing/distributing them to employees
- Employer or employer-selected provider issuing debit cards and online accounts that employees can use for transit and parking
- Employer or employer-selected provider depositing funds onto a smart card, like San Francisco’s Clipper card, Boston’s CharlieCard, SmarTrip in Washington, D.C., etc.
How do I enroll?
If you’re an employee:
Employees can only take advantage of the commuter benefits if their company has a program. Ask your HR department—both you and your company will save money.
If you’re an employer:
There are numerous ways to take advantage of pre-tax commuter benefits, depending on your preferred level of contribution and involvement. Employers can contribute to employees’ commuter benefits, have employees deduct commuter funds from their pay and purchase passes themselves, or offer a combination of the two, all pre-tax.
Setting up commuter benefits yourself can be time-consuming, so if you’re going at it alone, think about whether you have time for setup and admin or if you’d rather use an outside service, especially if you’d like to give employees the ability to set their own contributions preferences.
If you use a provider, commuter benefits deductions and tax obligations can be factored into other HR considerations like payroll. Options like Zenefits help companies easily offer commuter benefits alongside other benefits accounts like FSAs (flexible spending accounts). With Zenefits in particular, employees can individually allocate funds to parking and transit and spend them with Zenefits-issued debit cards, without any additional HR admin.
Interested in using Zenefits for commuter benefits? Setup is simple—let’s talk.