Employee Transit Benefits refer to the IRS-approved program that allows employees to use pretax dollars to pay for certain employee commuting costs. This is very attractive to employees who suffer from long commutes, traffic congestion and vehicle maintenance costs. Transit benefits for employees will increase convenience, sustainability and cost-savings. State mandates and reduced payroll taxes shouldn’t be the primary focus of an employee transit benefit program. Instead, business owners can use them to attract and retain a talented workforce.
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Employee Benefits
Intense job competition and sluggish markets mean that many employees must accept good jobs far from their home. Using a personal vehicle for a long work commute may cost an employee hundreds of dollars in gas money every month and thousands of dollars in mechanic-based upkeep costs every year. The IRS has decreed that employee transit benefit programs empower employees to use pretax dollars to cover hundreds of dollars per month for parking, transportation and biking-related expenses. This is extremely beneficial to employees who live in high-tax, traffic congestion cities like Los Angeles and New York City. Using pretax money may help these employees save up to 30 percent on their commuting costs. Transit benefits won’t eliminate the daily stress of fighting stop-and-go traffic on the freeway, but they will decrease financial strain.
Employer Benefits
Any pretax money that employees use for transit benefits will be exempt from the employers’ payroll taxes. Most employers who offer employee transit benefit programs will reduce the amount of money they spend on maintenance for parking spaces. In rare cases, companies can actually stop renting property for parking spaces. Certain cities may legally require employers to provide employees with transit benefits. Most of the local transit authorities will provide helpful planning support and information resources to employers that want to set up a program. They often recommend third-party providers who can also help set up and run these programs. For example, these private programs may issue transit debit cards that employees can use to purchase transit passes and tickets with pretax dollars. The IRS offers a formal overview of the program here.
Alternative Ideas
The tax-free elements of transit benefit programs are naturally important to most employees and employers. However, there will always be workers will live in certain areas that are not served by public transportation. It is unfair to only offer transit benefits to employees who are strategically located near public transportation. This dilemma is remedied through using carpooling, telecommuting and flexible scheduling. For example, an employer-based carpool program may provide ride-matching service to help employees who live near each other form car pool groups or use van pool services. Monetary car pool incentives are considered taxable income for the employee, but van pool incentives are not. It’s best to survey and listen to the needs of employees. Employers may find that most workers aren’t interested in using public transportation, even if comes with excellent tax write offs.
When many companies within a specific area use employee transit benefits at the same time, it may reduce local traffic congestion anywhere from 20 to 50 percent. This sustainability may improve community relations, provide excellent public relations content and encourage employees to take advantage of ride-sharing company services.
