NYC Law Will Require Businesses to Offer Employees a Tax Break for Commuting Expenses

Starting Jan. 1, 2016, New York City will require employers with twenty full-time employees and above to provide their employees with pretax earnings to buy rides.

The NYC Transit Ordinance will extend benefits to more than 450,000 employees, and require city businesses to enroll their employees in a tax break for commuting expenses up to $130 per month.  Previously, the federal tax benefit existed but was not mandatory to offer.

“This is a win-win for local businesses and working New Yorkers alike—especially at a time when affordability remains one of the most pressing challenges facing our city,” said Mayor Bill de Blasio. “From saving employers money to making public transportation a more affordable option for straphangers, this bill will help New Yorkers get by a little easier.”

While employers may face a larger administrative overhead in providing their employees with these benefits, Dept. of Consumers Affairs Commissioner Julie Menin says that the cost could be offset with savings resulting from a lower tax burden.

“The more employees that sign up for the transit benefits, the more employers can save on payroll taxes,” she said. Qualifying businesses have until July 1, 2016, to begin offering the benefits to their employees.

According to the Commuter Benefits website, expenses which can be used toward parking expenses, bus, ferry, train, trolley tickets and passes, parking expenses, vanpool fees, and bike maintenance and repairs. After July 1, employers that fail to offer the benefit will be subject to a civil penalty up to $250, with the option of fixing the violation within 90 days in order to have the fine waived.

Note: The new Commuter Benefits Law provides savings to employees by allowing them to deduct up to $130 of their pre-tax earnings to pay for transit monthly. Employers are NOT required to pay for their employees’ commuting expenses.

FingerCheck’s Director of Payroll Compliance, Merle Capello CPP, explains that businesses can easily adjust to the new law by turning to vendors to do the brunt of the work.

“In order to offer a commuter benefits program to your employees, you would have to have a qualified plan, which means you’d need to make a 5500 filing, have a summary plan description, and deal with other compliance issues. The good news about using a vendor is that it’s almost plugged and play for the employer. All they’d have to do is announce they are offering this plan through the vendor, and ask the employees to go to their website, opt-in for what they want, and the vendor takes care of the qualification, administration, secures the  benefits, and even takes care of the deductions, end of the story.”

Of course, organizations can still elect to offer the commuter benefits in-house, but doing so will require more work internally, as employers must find a way to funnel the funds into an accountable means of providing employees their pre-tax deductions for transit. According to law, employers must make sure that the funds are being allocated for transit.

For more information, readers are encouraged to go to the Commuter Benefits official website at nyc.gov/commuterbenefits, and employees and employers alike can email their general inbox at commuterbenefits@dca.nyc.gov for questions.