What Are Commuter Benefits?

Employers that offer non-traditional benefits generally stand out from the competition. Offering benefits and perks that other companies don’t can make the difference in whether an employee accepts an offer with your organization or not. In addition, offering non-traditional perks and benefits can help you retain talent and have a positive impact on company morale and culture.

Given that a candidate’s or employee’s commute is a significant consideration when they are deciding between job offers or deciding whether to leave and accept another job, respectively, it’s wise for organizations to offer benefits that help cover the cost of their commute or commuter benefits.

The good news? Commuter benefits not only benefit the employee — they provide several benefits, including a direct monetary benefit, for the employer, as well.

What Are Commuter Benefits?

Commuter benefits offered by employers allow employees to receive pre-tax dollars to help cover the cost of their commute to and from work. As a result, they can keep more money in their pockets each paycheck. Employers that offer commuter benefits can also save money in the reduction of payroll taxes.

Why Should Employers Offer Commuter Benefits?

Commuter benefits provide savings and benefits to both the employer and employee. For employers, they can:

•            Save the organization money

•            Enhance their benefits package

•            Attract top talent

•            Increase employee retention

•            Engage employees

•            Improve employee morale

•            Promote a cleaner environment for the community

•            Create a less stressed work environment

For employees, they:

•            Reduce their taxable income

•            Have more money in their pocket each month

•            Have the opportunity to promote a cleaner environment

•            Can build relationships with coworkers when choosing to rideshare or vanpool

•            Can choose from various available commuting options

•            Can reduce stress by avoiding sitting in traffic where applicable and possible

Without commuter benefits, employees are subject to taxes on the money spent for commuting costs.

Commuting benefits help employees reduce the cost of getting to work daily.

Regarding savings, employees can save an average of $740 annually when they put aside $280 per month to cover transit commuting expenses. Employers can save an average of $40 per employee participating per month. Thus, if the employer has 100 employees participating, they can save some $48,000 each year.

How Do Commuter Benefits Work?

By offering commuter benefits, employers are supporting their employees with their daily commute to work. When employees enroll in their employer’s commuter benefits program, it allows them to cover commuting costs on a pre-tax basis up to the IRS limit, which is $280/month for 2022.

Commuter benefits can cover all sorts of transportation costs, from transit and parking to bicycle, ridesharing, and vanpools. Given the many ways an employee can travel to and from work, employers can provide commuter benefits in all sorts of payment types, including:

•            Transit Passes

•            Direct Payments

•            Vouchers

•            Debit Cards

•            Cash Expense Reimbursement

•            Smart Cards

Once launched by the employer, employees enroll in the program by providing the necessary information, including their commuting details. Once enrolled, employees can receive their commuter benefit payment type at work or at home.

Current legislation indicates that organizations can provide commuter benefits in the form of:

•            Pre-tax employee-paid payroll deductions

•            Tax-free employer-paid subsidies

•            A combination of the two

It’s possible to offer the benefit as a supplemental benefit, a substitute for taxable salary, or a combination of both.

Where Are Commuter Benefits Required by Law?

More and more areas throughout the U.S. are passing commuter benefits ordinances. Some of the regions and cities that have passed laws that require employers to offer commuter benefits include:

•            Berkeley, CA: Berkeley employers with 10 or more employees are required to offer a pre-tax, employer-paid, or employer-provided transit to cover certain commuter benefits. Employees that work an average of 10 or more hours weekly qualify.

•            Los Angeles, CA: The Los Angeles County Commuter Benefit Plan provides commuter benefit coverage to Los Angeles County employees who choose to join the program. Los Angeles law also requires employers with 50 or more full-time employees to provide a qualifying pretax transportation benefits program. Full-time employees are eligible for the program.

•            New Jersey: The New Jersey Commuter Benefit Ordinance applies to all non-tax-exempt organizations with 20 or more employees to offer employees that work an average of 10 hours or more per week commuter benefits. Employees do not need to be New Jersey residents to qualify.

•            New York City: The NYC Transit Ordinance indicated commuter benefits must be covered for transit expenses by employers in the five boroughs with 20 or more full-time employees. Employers do not have to cover parking benefits. Employees do not need to live in the five boroughs to qualify.

•            Richmond, CA: Richmond requires employers with 10 or more employees that work at least 10 hours per week on average to offer a pre-tax election or an employer-paid benefit to cover qualifying costs, or they can offer an employer-provided transit.

•            San Francisco, CA: The Bay Area requires employers with 50 or more full-time employees to offer a pre-tax benefit or employer-provided subsidy to cover transit or vanpool costs, or the employer can offer an employer-provided transit.

•            Seattle, WA: Seattle requires all employers with 20 or more employees to offer a benefit. Tax-exempt employers are exempt from the requirement. Employees working 10 or more hours per week on average are eligible. They do not need to be a Seattle resident to quality, as long as they work in the city.

•            Washington, D.C.: DC law requires all D.C. companies, including non-profits, with 20 or more employees to offer commuter benefits for transit costs.

If your organization falls within one of the above locations, you’re legally required to offer a commuter benefit program of some sort. Local ordinances and laws are continually changing, so it’s a good idea to check the employment laws in your area on a regular basis for updates.

What Doe an Ideal Commuter Benefits Program Offer?

It’s up to employers to design a commuter benefits program to meet the needs of their employees and the company. Ideally, the program will offer coverage for the various types of commuting options and payment types necessary for all employees. It will also offer an online platform that provides ease of use and flexibility for both employees and employers—for employees to enroll, update enrollment options, and receive payment or expense reimbursement and for employers to manage and administer the program. Many employers opt to work with a benefits broker and a third-party administrator that offer expertise and the knowledge necessary to provide a well-rounded commuter program.

What Types of Commutes Are Covered?

Any of the following commuting options can qualify for a commuter benefits program based on the employer’s preferences:

Carpools:

•            Ridesharing (i.e., Lyft, Uber)

•            Vanpool

Transit Riders:

•            Bus

•            Ferry

•            Light Rail

•            Subway

•            Train

•            Trolley

•            Water Taxi

Drivers:

•            Garages

•            Meters

•            Parking Expenses

•            Parking Lots

Bicycles:

•            Bicycle riding can also be part of a commuter benefit program. Employees can receive up to $20 per month in benefits to cover the cost of repairs and equipment. However, employers do not receive a monetary benefit for offering bicycle commuter benefits.

What’s the Best Way to Implement a Commuting Program?

Below are some steps to help your business launch its own employee commuter benefits program.

•            Assess your employee population. You’ll want to determine how your employees currently get to and from work to determine the best options to cover and how to issue the benefit. It’s also a good idea to survey employees to identify transportation options they might consider if offered commuting benefits.

•            Identify the right benefit level and options to provide. It’s common to offer a benefit up to the IRS limit, though how you choose to offer the benefit will vary based on your business needs and bottom line.

•            Launch the program. Once you have the program plan outlined and set, it’s time to launch. Communication is key to encouraging employees to enroll. Email, in-person and virtual meetings, posters, handouts, and so on are all viable marketing options to get the word out about the program.

•            Frequently engage employees. Get in front of employees on a regular basis to remind them about the program and to encourage them to make any updates to their benefits as permitted based on their needs.

Why Work with an Employee Benefits Broker?

Employee benefits brokers have access to expertise and providers for the many employee benefits needs your company might have. When it comes to commuter benefits, a reputable employment broker can support you in assessing your employee population, identifying benefit options, determining the best administration options and companies to support your program, and ensuring you’re meeting any necessary legal requirements for your area. Or, if you’re looking to make a change to your current program, a benefits broker can help you identify other options and make the transition to another provider as seamless as possible.

At KBI, our team of experts is here to support you with your commuter benefits needs, as well as any other type of employee benefits or insurance needs you might have. Contact us today for more information.