Starting March 1st, all New Jersey employers with a minimum of 20 employees will be required to offer a pre-tax transportation fringe benefit to employees.
Last year, New Jersey became the first state to enact a law requiring employers to offer a pre-tax transportation fringe benefit. NJ employers and small business owners should review their current benefit offerings to ensure they are in compliance.
Federal law allows employers to offer employees the opportunity to pay for qualified commuting expenses with pretax dollars. Section 132(f) of the Internal Revenue Code provides an exclusion from an employee’s gross income of up to $270 per month in “qualified transportation fringe benefits,” including transit passes, qualified parking, and the cost of transportation in a commuter highway vehicle between the employee’s home and work.
Last year, New Jersey became the first state to mandate a pretax transportation fringe benefit for employees. For purposes of this law, an “employee” means anyone hired or employed by the employer and who reports to the employer’s work location (this follows the definition under the state’s unemployment compensation law).
The Transit Benefits Law authorizes New Jersey’s Commissioner of Labor and Workforce Development (NJDOL) to enforce the new mandate and to impose penalties on employers that fail to offer a pretax transportation fringe benefit, beginning March 1, 2020.
NOTE: Employers will not have to offer the benefit to employees who were covered by a collective bargaining agreement in effect on March 1, 2019, until the agreement expires.
When enforcement begins, penalties for non-compliance will range between $100 and $250 for a first violation. However, employers will be given 90 days to offer a pretax transit benefit before the penalty is actually imposed. Should that window of time be missed, every additional 30-day period in which the employer fails to offer the benefit will bring on another violation of up to $250 in penalties.
New Jersey employers that are required to offer pre-tax transportation fringe benefits should review their current benefit offerings to ensure compliance and monitor the NJDOL website for rules and regulations on the administration and enforcement of the new law as well as any additional requirements.