As the world emerges working in its bedrooms, garages, and laundry rooms to congregate again in offices and other workspaces, the cost of a commute comes back into focus. Commuter benefits are a great way for employers to help employees pay for these costs with pre-tax money, potentially saving them hundreds of dollars in tax liabilities. The IRS allows employees to save and use up to $280 in their transit accounts per month, which means employers save an average of $40 per participating employee per month on payroll taxes.
Some cities and one state (New Jersey) already require companies with offices in their jurisdiction to offer employees a commuting benefit. Here are the details:
- Bay Area: Only employers with 50 or more full time employees are required to provide commuter benefits.
- San Francisco: Only employers with 20 or more employees in SF or nationwide are required to provide commuter benefits.
- Richmond and Berkeley: Only employers with 10 or more employees are required to provide commuter benefits.
- District of Columbia: Only employers with 20 or more employees are required to provide commuter benefits.
- New York City: Only employers with 20 or more employees are required to provide commuter benefits.
- Seattle: Only employers with at least 20 employees; employees are eligible if they worked in Seattle at least an average of 10 hours per week in the previous month are required to provide commuter benefits.
- New Jersey: Only employers with 20 or more employees are required to provide commuter benefits.
Even if commuter benefits aren’t required where your business is located, giving your employees more ways to save could help your company retain workers and stand out to potential employees. Allowing you to attract talent you might not otherwise. Companies can offer commuter benefits in the form of a tax-free, employer-paid subsidy, a pre-tax employee-paid subsidy or a combination of both.
Types of benefits for commuting employees
Whether you drive your car, take public transportation or ride your bike, there is a commuter benefit for you.
Drivers: If you drive your car to work, you can use your account to pay for daily or monthly parking (garages, lots or meters) near your workplace or mass transit station. Carpoolers: If you use a qualified carpooling service like Vanpool, Uberpool and Lyftshared, you can use your commuter benefits to pay for this cost. Mass Transit Riders: Your commuter benefit can be used to pay for your work-related fares for the: bus, subway, train, trolley, ferry, water taxi and light rail. Bikers: If you ride your bicycle to work, you can use up to $20/month for equipment and repairs.
Typically, commuter benefits come in the form of either a Mass Transit Account or Parking Account. Unfortunately, they’re usually not offered as one all-encompassing commuter benefits account that can be used for any qualified expense.
Mass Transit Accounts
If your employer offers a mass transit account, the first step to signing up is to decide how much you’d like to contribute on a monthly basis. If you take the same route every day to the office, this calculation should be simple: simply multiply the roundtrip fare by the number of days you commute. If it’s not the same every day or differs from week to week, go back and look at your costs over the past year and estimate based on that.
Once you decide how much you’d like to contribute (up to $280/month), and use the digital platform offered by your benefits administrator to register for and manage your account.
If your employer offers a parking account, you’ll follow the same process as above. Estimate what you’ll need to save to cover your parking costs (up to $280/month) and use your benefits administrator’s digital platform to sign up for and manage your account.
Paying for qualified expenses with your benefits
There are many ways to pay for qualified expenses using your commuter benefits. If your benefits administrator issues a debit card linked to your account, you can simply use it at approved vendors like your mass transit operator (e.g. SFMuni), or rideshare company (e.g. Uberpool).
Other ways to pay for your commute include: vouchers, smart cards, transit passes and direct payments to vendors like the garage with which you have a monthly parking arrangement.
Some benefits administrators have strict policies about how you use your commuter account to pay for certain expenses. For example they might require you to pay for mass transit costs using your benefits debit card. So make sure you read the details of your benefits plan before you start using your account.
Reimbursing yourself for qualified expenses with parking benefits
If you’re receiving a cash reimbursement for work-related parking expenses for which you’ve paid out of pocket, you need to file a claim with your benefits administrator. Although the process for filing a claim may differ between companies, you will probably need your receipts and to file your claim within 180 days of incurring the expense.
Most administrators have a digital portal through which you can file your claim for parking reimbursement.
What else you need to know about your commuter benefits
- They can only be used for expenses related to your commute. Parking, transit and other travel expenses used for personal reasons or for your spouse or dependents aren’t eligible.
- Money can’t be transferred between Parking and Mass Transit accounts. So make sure you’re as accurate as possible with your cost estimation.
- You can only claim up to the amount that’s in your benefits account at the time you submit the expense for reimbursement.
Build a robust employee benefits program
Commuter benefits are part of a well-rounded benefits package that both supports employees and saves employers money. Complementary benefits include High Deductible Health Plans (HDHP) paired with Health Savings Accounts (HSAs) and Flexible Spending Accounts (FSAs).
To find out how Lively can help your company offer a robust benefits package, reach out today!
Disclaimer: the content presented in this article are for informational purposes only, and is not, and must not be considered tax, investment, legal, accounting or financial planning advice, nor a recommendation as to a specific course of action. Investors should consult all available information, including fund prospectuses, and consult with appropriate tax, investment, accounting, legal, and accounting professionals, as appropriate, before making any investment or utilizing any financial planning strategy.