How Does Pre Tax Commuter Benefits Work

What Is The Maximum Federal Transit Benefit

How to use an OMNY Card Pre-Tax Commuter Benefits

The maximum allowed transportation benefit is $270 per month for calendar year 2020.

Do transit funds expire?

Commuter benefits funds do not expire unless you leave your company. These funds will continue to rollover month to month, year to year, as long as youre still at the same company. However, when you leave the company, any unused funds in your account will be returned to the company.

https://www.youtube.com/watch?v=o-4IxueV8-0

How Commuter Benefits Work

A primer on commuter benefits

Commuter benefits are a great resource for employees who need to commute to work. If youre thinking about adding commuter benefits to your companys list of benefits, here is some information on how it works.

How employees and employers save money

Commuter benefits are a pre-tax program that allows employees and employers to save money. For employees, commuters set aside money in their paychecks tax-free every month to pay for commuting costs. Those savings mean employees pay less in tax on those earnings. The current limit is $270 per month.

They can spend the money on mass transit, qualified paid parking, or rideshares. The money is paid directly to a transit or parking vendor or set up on a voucher or debit card.

Employers also enjoy significant savings with commuter benefits. Employers save about $40 per month for each employee who participates in the program. Thats because the payroll tax bill goes down as more employees save money tax-free.

If employers have 50 employees participate for 12 months, the business can save over $24,000 annually. Employees can save $700 each year if they set aside the maximum amount of money for transit expenses each month.

How it works under IRS

Employers must reimburse employees for transportation after employees produce proof of the expense. Commuter benefits are not taxed.

Commuter benefit regulations

Deadlines & Application Process

There is no annual open period you can sign up and make changes on a monthly basis. To get started, refer to the Quick Reference Guide.
Participants must complete their monthly transit and/or parking order by the tenth of each month prior to the benefit month. For example, if a participant needs transit passes for March, the order will have to be placed through Payflex no later than February 10.
The incurred costs of our commuting expenses are deducted pretax from a participants paycheck the month after the order is placed.
To set up an account with Payflex, participants need to provide their Princeton benefits ID number located in HR Self Service under Benefit Details.

Don’t Miss: What Employee Benefits Are Required By Law

What Can I Use Pre

Commuters can use pre-tax dollars to pay for their commute and save on taxes. Subway, bus, train, ferry, car, or vanpool: Weve got you covered. Employers also save money by driving down payroll taxes with every dollar an employee deducts.

How Do I Choose A Vendor

All businesses are encouraged to shop around, first inquiring with their existing benefits administrator. ContactCommuteSeattleforalist of vendors who currently provide commuter benefits in the Seattle area.

For over 10 years, Commute Seattle has helped local businesses of all sizes unlock their potential and empower employees to use convenient, affordable, and sustainable transportation options. Commute Seattle offers free consultations to businesses interested in learning more about commuter benefits and ORCA Business programs. We provide consulting services, parking management strategies, best practices in providing transportation, and more. We also offer a variety of educational services including transportation fairs and commuter seminars.

Call 206-613-3131 or connect with us for more information or to schedule a free consultation.

Also Check: Benefits Of Paying Quarterly Taxes

Keep More Money In Your Pocket

Even if you dont always look forward to your commute, you can look forward to using your Commuter Benefits to pay for transit and parking expenses. Its easy and convenient to use and you could potentially benefit from significant tax savings by the end of the year.

1 State and/or local income tax treatment of payroll contributions to a Commuter Benefit account may vary. Participants may wish to consult with a tax advisor regarding the state income tax treatment of such contributions.

What Types Of Commutes Are Covered

Any of the following commuting options can qualify for a commuter benefits program based on the employers preferences:

Carpools:

Parking Lots

Bicycles:

Bicycle riding can also be part of a commuter benefit program. Employees can receive up to $20 per month in benefits to cover the cost of repairs and equipment. However, employers do not receive a monetary benefit for offering bicycle commuter benefits.

How To Spend Parking Funds

Prepaid Cards

Our prepaid cards offer the functionality and convenience of a reloadable, personalized, prepaid card for use at parking facilities nationwide. No receipts are necessary with this solution, just swipe and go!

Monthly Direct Pay

We can directly pay parking and vanpool providers on your behalf. This is a great option for commuters who pay for parking on a monthly or quarterly basis.

Commuter Check for Parking Vouchers

These vouchers are made payable to the parking provider of your choice and can be used to pay for parking expenses. Commuter Check for parking vouchers may be used to purchase one or more types of parking, and you can order as many vouchers as needed for multiple parking providers.

Parking Cash Reimbursement

Perfect for those who only park on an occasional basis, use multiple parking lots, park at parking meters, or utilize a parking provider that will not accept checks or third party payments.

Spot Hero

Use your Commuter Check Prepaid Mastercard to pay for parking with SpotHero. With SpotHero, you can easily book affordable parking at more than 5,000 garages, lots and valets.

How Do I Get Started

Commuter benefits: The smartest way to get to work

To get started, go to payflex.com. Youll first need to register by selecting Register Now. Once you have registered, you can get to your commuter account online by going to “My Dashboard” and clicking on “Commuter Benefits.” From your own computer, you can order transit and parking passes, vouchers, commuter checks, and more! Youll receive them in the mail at your home address. Once you have an account, about how to navigate the system.

Recommended Reading: Do I Have To Pay Taxes On Unemployment Benefits

What Is The Commuter Benefits Online Program

This program provides you with an online ordering system for transportation and parking. By using this benefit, you can save on your income, Social Security taxes by paying for your commuting expenses with pre-tax dollars up to the IRS limit. Orders are made online, the purchase price is deducted from your paycheck and your passes are mailed directly to your home. Passes can be ordered for any amount. Any orders above the pre-tax limit will be charged to your credit card.

One Regional Card For All

ORCA passes are unique electronic cards used to pay for rides on public transportation throughout the Puget Sound region. Riders can load the card with funds and use it like a debit card, or add a variety of passes to cover regional buses, trains, streetcars and ferries. While companies outside of the Puget Sound region rely heavily on commuter debit cards provided by third-party vendors to provide their employees flexible commuter benefits over 1,200 Seattle businesses choose an ORCA Business Program!

ORCA Business Passportis a cost-effective, comprehensive, annual transportation pass program only available to employers. Employees canpayfortheirshareofPassportusingpre-tax income, saving the individual and company on taxes while getting Passports bulk pricing. Employers region-wide can participate with 5+ employees. Custom contracts are available to businesses with 500+ employees.

ORCA Business Choice allows employers to load a dollar amount ora variety of passes, including Puget Passes and Washington State Ferry passes, onto their employees ORCA cards at retail pricing on a monthly basis. Choice gives employers the flexibility to subsidize as much or as little of their employees transportation costs as they want while letting employees use pre-tax income to pay the remainder. Employers also have the flexibility to choose who they cover.

Also Check: How Long Does It Take To Get Social Security Benefits

How The Savings Work

On average, employees save $700 each year, or more when they set aside up to $300.00 a month to pay for transit commuting expenses. Below is an estimated tax savings for someone who uses commuter benefits for transit and parking expenses.

*Estimated employee savings are for informational purposes only, and based on the 2023 tax year. Individual savings may vary based upon income, individual tax rates, state of residence and other factors. Please consult your tax advisor.

What Happens To Unused Funds And Can I Get A Refund

The IRS prohibits employers from providing refunds of unused transit amounts to active or terminated employees. For active employees, unused amounts can be carried over to subsequent months through continued active employment. Please note, there may be a fee associated with holding the unused funds and you should follow up with the Commuter company directly if you have any questions or concerns. Cornell is unable provide information on fees and has no control over the fees that may be charged.

Attract The Best People And Keep Them

The commute plays a major role in any job decision. And thats not just true for prospective hires. Your current employees are thinking about it, too: How much is my commute costing me? Helping your employees save on their commute will give you an edge on your benefit strategy. And every advantage counts in attracting and keeping talent.

Where Are Commuter Benefits Required By Law

More and more areas throughout the U.S. are passing commuter benefits ordinances. Some of the regions and cities that have passed laws that require employers to offer commuter benefits include:

Berkeley, CA: Berkeley employers with 10 or more employees are required to offer a pre-tax, employer-paid, or employer-provided transit to cover certain commuter benefits. Employees that work an average of 10 or more hours weekly qualify.

Los Angeles, CA: The Los Angeles County Commuter Benefit Plan provides commuter benefit coverage to Los Angeles County employees who choose to join the program. Los Angeles law also requires employers with 50 or more full-time employees to provide a qualifying pretax transportation benefits program. Full-time employees are eligible for the program.

New Jersey: The New Jersey Commuter Benefit Ordinance applies to all non-tax-exempt organizations with 20 or more employees to offer employees that work an average of 10 hours or more per week commuter benefits. Employees do not need to be New Jersey residents to qualify.

New York City: The NYC Transit Ordinance indicated commuter benefits must be covered for transit expenses by employers in the five boroughs with 20 or more full-time employees. Employers do not have to cover parking benefits. Employees do not need to live in the five boroughs to qualify.

Don’t Miss: Ssa.gov/benefits/retirement/apply.html

Paying For Commuter Expenses Is Easy And Convenient

Paying for transit and parking expenses is done in much the same way as you pay for other expenses using a debit card. Simply swipe your debit card and the charges go against the appropriate health and benefit account based on your enrollment and the merchant code for each transaction. When you pay with your Bank of America Health and Benefit Account Debit Card, theres no need for receipts or waiting around for reimbursements. While your debit card is the only form of payment you can use for transit expenses, you can pay for parking expenses either with your debit card or another source, and then submit a claim to reimburse yourself via the member website or MyHealth mobile app.

Iii Determining Number Of Full

How to use OMNY with Pre-Tax Benefits

If an employer has full-time employees who work in a borough other than Manhattan, do the employees in the outer boroughs count toward the number of employees?If an employer has multiple locations, do all full-time employees count toward the number of employees?

Scenarios:An employer has two locations in New York City. The first location employs eight full-time employees. The second location employs 14 full-time employees. Would this employer be required to offer commuter benefits? Yes. The employer employs a total of 22 full-time employees at the two locations. The employer must provide commuter benefits to all of its full-time employees. An employer owns seven retail stores in New York City. Each location employs seven full-time employees. Would this employer be required to offer commuter benefits? Yes. The business employs a total of 49 full-time employees at the retail stores. The business must provide commuter benefits to all of its full-time employees.

Can employers with fewer than 20 full-time employees working in New York City offer commuter benefits to their employees?Does an employer with fewer than 20 full-time employees working in New York City but more than 20 full-time employees working outside of New York City have to offer commuter benefits?If an employer is part of a chain business, do all full-time employees count toward the number of employees?

You May Like: Tax Benefits Work From Home

How To Spend Transit Funds

Prepaid Cards

Reloadable commuter benefit cards that are accepted at transit agencies or designated transit retail centers where only transit and vanpool passes, tickets, and fare cards are sold, or at fare vending machines.

Commuter Check Vouchers

Commuter Check Vouchers are redeemable for passes, tickets, or cards anywhere transit, parking, or vanpool vouchers are accepted.

Transit Passes

We offer products for hundreds of transit agencies nationwide. Simply select your desired transit passes through your Commuter Benefit Solutions online account, and you will receive your product by mail each month.

Smart Cards

We offer several transit agency-specific Smart Cards across the nation. And, we are constantly adding more to our catalog.

What If I Dont Have A Monthly Parking Location That Is Set

If your parking provider cannot take payments directly from PayFlex, you can still participate in the pre-tax benefit by enrolling in the Cash Reimbursement program. After you have paid for your parking and obtained a receipt, simply submit your claim online for reimbursement or via paper claim form.

How Much Does The Program Cost

Commuter benefit programs are generally cost-neutral or even save businesses money. They also promote goodwill amongst staff by helping them save money on their commutes. They can also free up nearby parking for customers and guests by encouraging employees to find new ways to commute. Transit benefits are a proven way to increase the use of public transportation by employees by cutting their commute cost up to 40%.

Commuting Expenses Are Typically Non

Let’s start with the basics: The cost of commuting back and forth between home and work is not deductible, whether you are an employee or the owner of a business.

What this article looks at are exceptions to this IRS restriction, for two purposes:

To allow businesses to deduct the cost of reimbursing employees for these costs as an employee benefit
To allow employers not to include these reimbursements as taxable income to employees. This is usually an exclusion from income tax withholding and FICA taxes, but also affects the employer’s unemployment tax liability

Also Check: Eligible For Social Security Benefits

Setting Up A Commuter Benefits Program

If you decide to offer a commuter benefits program, or if your business is located in a city that requires it, you need to know your employer responsibilities.

You can use a third-party administrator to set up your program. Generally, you will need to pay a fee per employee. Or, you may be able to create and manage your account through your local transit agency.

After you set up the program, employees must enroll to receive benefits. Educate your employees on the program and thoroughly discuss the program rules. Make information accessible on how they can enroll, what the funds can be used for, how much they can contribute, and whether you are also contributing to their plans.

Employees need to tell you how much they will contribute to their plan. Remember, you and your employee can only contribute up to a combined total of $280 per program per month.

When employees enroll, you need to adjust your payroll. If you are using payroll software, enter the employees contribution amounts as a pre-tax deduction. That way, you can withhold the correct amount of taxes, pay the employee, and add their contribution to their commuter benefits plan.

Looking to simplify how you run payroll? Patriots online payroll services provide an affordable, accurate, and reliable option for managing payroll. Our online software is made for busy small business owners. Get your free trial today!

This article has been updated from its original publication date of September 12, 2018.

Why You Should Offer Commuter Benefits To Your Employees

Employees save on commuting costs while employers save on payroll taxes.
A great benefit that helps attract, retain and reward employees.
Easy, hassle-free sign up leaves more time for other important tasks
Helps create a happier, less stressed and productive work environment

Ready to start saving? We can help! Commuter Benefit Solutions offers programs designed for large, national organizations, medium-sized companies and small business. Each offers a full range of products for employees and specialized commuter benefits support and service for employees and employers.

If you want to learn more about commuter benefits to save money, download our 101 Guide now.

What Are The Benefits Of A Commuter Benefits Account

Tax BenefitsContributions to a commuter benefits account are deducted from your paycheck on a pre-tax basis, reducingyour taxable income. You can save an average of 30%* on your eligible transit and parking expenses.

*For illustrative purposes only. Savings calculations are based on a federal tax rate of 15%,state tax rate of 5%, and 7.65% FICA.

How Much Can You Spend

How commuter benefits work?

You can set aside up to $300 per month on transit expenses and up to $300 per month on parking expenses. The IRS reviews this amount yearly, setting higher limits with an average of a $5 increase each year. Keep in mind that transit and parking funds are considered two separate buckets of money. Be sure to calculate both your transit and parking expenses separately, and choose contributions accordingly.

Read Also: Tax Benefits Of 529 Contributions