Commuter Benefits: A win-win for employers and employees

What Are Commuter Benefits?

Do your employees take the bus, train, or vanpool to work? If so, they could be saving up to 40% on their commuting expenses. The federal government allows employees to deduct up to $230 per month from their paychecks, pre-tax, to pay for transit, parking or vanpool expenses.

Employees save by using pre-tax dollars for their commuting expenses and employers get the advantage of reduced payroll taxes. This popular program is relatively easy to add to an employee benefit package and inexpensive to administer.

Thousands of employers across the country are offering Commuter Benefits to their employees. Your employees could be taking advantage of these savings, too!

Ride Transit or Vanpool for Less… With commuter benefits, employees can save 40% on their commuting costs.

Sample Savings

(Based on an employee spending $115 per month on transit.)

* Savings calculations are based on average tax percentages of 7.65% FICA and Medicare, 28% Federal Income Tax. Actual tax savings depend on the individual’s and employer’s tax rates.

How Does It Work?

Commuter benefits are obtained through the employer. When the employer offers the benefit, employees can deduct up to $230 per month from their paycheck, pre-tax, to pay for transit or vanpool expenses. Because employees don't pay taxes on the money they deduct, they save on the cost of their transit tickets or vanpool expenses.

Employers Save Too

As a pre-tax payroll deduction, an employer saves on FICA taxes – up to approximately $100 per participant per year. As a subsidized benefit, it can be written off as a business expense. The cost of administering the program is often less than the savings an employer gets from offering it!

The benefit is easy to set up and administer, and employees will enjoy the 40% savings on their commuting costs every day. You’ll see tangible results in increased employee morale and satisfaction and reduced absenteeism or turnover. Commuter benefits are a useful, practical, and smart addition to any employee benefit package.

Who Is Eligible?

All employers in the private, public, and non-profit sector are eligible for the benefit, and it works for any size employer from the largest to the smallest.

Commuter Benefits Are Easy to Set Up

The benefit works like other pre-tax plans such as dependent care and medical reimbursement, except that it’s much simpler. It is exempt from the usual restrictions and reporting requirements that accompany other pre-tax programs allowed by the IRS. There are no plan filings or forms for the employer to fill out, no irrevocable elections and no mandatory enrollment dates.

Employers can offer commuter tax benefits as a payroll deduction, a subsidized benefit, or a combination of the two. Most employers administer the benefit themselves, purchasing the transit tickets or vouchers each month and distributing them to employees. Some employers (especially larger ones) might find it more practical to hire a third-party administrator to manage their program.

How Do I Offer Commuter Benefits?

• Tell management about commuter benefits.
   
• Call 1-800-234-RIDE (7433) for assistance in setting up a commuter tax benefit program at your worksite.

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