Commuter benefits are expenses reduction program provided by employers to employees. It is also known as transportation or transit benefits. The program is provided to help employees in reducing their monthly transportation expenses. Employee commuter benefits are pre-tax payroll deductions. Meaning it reduces employee income taxes and employer payroll taxes. The various benefits employees get from the program include bicycling, vanpooling, public transit, and work-related parking expenses. In most cities like the New York, Washington DC, and San Francisco, these benefits are made mandatory by the Commuter benefits laws.
In 1993, the employee commuter benefits came into law when the IRS was encouraging the use of public transit by employers. And in 2009, bicycle commuter benefit was added to the law. However, the regulation and implementation of this law vary by state.
Aside from the practicing cities, employers can still provide employees commuter benefits. For places like San Francisco, New York City, Richmond, CA, Washington, D.C and Berkeley, CA, there are strong commuter benefits laws that mandate employers to provide commuter benefits for their workers. The transportation benefits laws in these cities apply to businesses with over 20 full-time employees aside from Berkeley where it applies to businesses with as low as 10 employees who work either full time or part-time.
Some HR benefits and payroll software come with an option that allows employers to provide commuter benefits. Using any of this software as an employer allows you to set up the various deductions of the employees and your contribution directly within the software programmed to handle all calculations.
Employers can also choose to personally set up the commuter benefit. You can do this by setting up your business account with the local transit agency after which you can register for passes under the company name for participating employees.
However, it’s a little more difficult when you provide the transit benefits yourself. This is because there is a need for you to keep track of the employees’ purchases, times, and cost. You can also make the deductions manually using the company’s payroll system.