When employees feel that management cares for their needs, it can boost morale. Motivated employees are in turn more likely to increase productivity, collaborate effectively, and tackle workplace challenges. Commuter benefits may also be applied to nearby parking spots and tolls.
Additionally, identifying specific needs, such as parking subsidies or transit passes, can help tailor the benefits to maximize employee engagement and usage. Employer-sponsored flexible spending accounts (FSAs) allow employees to pay for qualified transportation costs with pretax dollars. Before the start of the next benefits plan year, you choose how much money you want deducted from each paycheck and contributed to this account. Make sure to keep all receipts in case you need to prove you spent those dollars on commuting. Contributions are transferred from your paycheck and credited to your commuter benefits account with pre-tax dollars.
Additionally, some local jurisdictions provide tax breaks and incentives to organizations that provide these benefits. For example, Washington state provides a tax credit to employers who provide a trip reduction incentive, such as ride-sharing, public transportation, car sharing, and non-motorized commuting. Any organization with 50 or more full-time employees must offer commuter benefits. Any organization with 20 or more full-time employees who work in the city must offer pre-tax benefits for public transit costs. While there are no federal obligations to provide benefits to commuters, some state and local laws require employers to offer commuter benefits to their workers.
What are commuter benefits programs?
This involves calculating the potential expenses, consider potential savings, estimating tax benefits, and comparing alternatives of transportation programs. For example, a company located in a large metropolitan area may provide public transportation benefits — as that may be the primary mode of transportation in a big city. But a company located in a smaller rural area may not offer that benefit if their employees generally drive to work — though they may offer a parking benefit.
Scenario 1: Transit Passes
- Many commuter benefit TPAs offer employee after-tax contributions for excess amounts.
- Commuter benefits are compensation perks to help employees save money by taking sustainable transportation, such as public transit, bicycling, rideshares in electric cars, and so forth.
- Basic maintenance and repairs may be periodically needed on personal vehicles and bikes used for commuting to work.
- Per IRS regulations, employers cannot refund unused commuter benefits funds to employees.
Fares and passes to ride mass transit vehicles to and from work could be covered. Public transit or mass transit vehicles may include buses, trains, ferries, trolleys, subways, streetcars, and water taxis. If an employee’s commuter account has leftover funds at the end of the company’s fiscal year, they can usually be rolled over into the account for the following year. Here’s an overview of how a commuter benefit plan is set up and executed. Or, you may be able to create and manage your account through your local transit agency.
Commuter Benefits 2025: Transport Your Employees to Better Tax Savings
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 $325 per program per month. From accurate calculations to unlimited payroll runs, it’s time to see what Patriot’s award-winning software can do for your business.
Speaking of saving gas, cruise control can help you drive more fuel-efficiently. In fact, a study by Edmunds, a car-shopping guide, found that driving with cruise control saves an average of 7% and as much as 14% on gas.
With many employees returning to the office, your work commute expenses may be on the rise. In our latest episode of our Benefits open enrollment series, watch our podcast below to learn how you can benefit with commuter benefits. A national PEO dedicated to helping small organizations succeed, ExtensisHR provides a wide range of Fortune 500-level benefits and benefits administration and management services. Their expert teams help time-strapped business leaders simplify HR workflows and ensure compliance with local commuter benefit laws and IRS tax regulations.
Employers that make employer contributions to the benefit might consider requesting the TPA enforce this requirement to prevent abuse of the benefit. Otherwise, employers generally would have no incentive to limit employees’ use of the benefit. After you set up the program, employees must enroll to receive benefits. Educate your employees on the program and thoroughly discuss the program rules.
Ride-share expenses
That’s because the payroll tax bill goes down as more employees save money tax-free. Yes, employer-paid commuter benefits such as transit passes and parking subsidies are typically tax-deductible in the UK, providing significant tax savings for businesses. Flexible Spending Accounts (FSAs) for transportation allow employees to set aside pre-tax dollars to pay for eligible commuting expenses. This can include public transit fares, parking fees, and other commuting-related costs. If a significant portion of the workforce relies on public transportation, bicycles, or carpools, offering relevant commuter benefits can greatly enhance job satisfaction and retention.
Many cities and counties allow workers to purchase public transit cards or passes on a pre-tax basis. Additionally, the IRS allows employers4 to provide commuter benefits with pre-tax dollars for qualified expenses. You can provide these benefits directly or through a reimbursement arrangement. An example of a commuter benefits program in the UK could be a transportation reimbursement plan that covers both public transit and cycling expenses.
By offering additional perks like commuter benefits, you can more easily attract top talent. Commuter benefits are employee perks that help your team offset the cost or time of commuting to and from work daily. These benefits are also known as transportation benefits, parking benefits, or employee transit benefits. Companies and employees everywhere can reap the rewards of a pre-tax commuter benefits program.
- Not all transportation-related expenses are included under commuter benefits.
- He’s written extensively on health benefits, contributing to his career total of more than 350 blog posts across diverse industries.
- You can also choose to offer allowances monthly, quarterly, or annually to best fit the needs of your organization.
- Employees can use the funds on qualifying expenses, such as public transportation and parking fees.
But no matter which benefits commuter benefits meaning you decide to offer, commuter benefits are a great way to improve employee retention and provide them with some financial relief. Employers with 50 or more employees must offer commuter benefits for mass transit and/or bicycle commuting. Any organization with 20 or more full-time employees must offer pre-tax benefits for public transportation costs or vanpools. This applies to any employees who work in NYC, even if they don’t reside there. Any organization with 50 to 249 full-time employees must offer pre-tax benefits for public transportation costs to full-time employees. Commuter benefits aren’t just popular in big cities with prevalent public transportation systems.
Employees can work from home or adjust their hours to avoid peak traffic times, which can lead to a better work-life balance. Chase Charaba is the Content Marketing Manager at PeopleKeep, where he brings three years of expertise in HRAs and health benefits. Having personally used both QSEHRA and ICHRA as an employee, Chase offers a unique perspective on how these solutions empower small employers and their teams.
