Commuter Benefits During Covid
Until March of 2020, the average travel time to work was 26.6 minutes (Census.gov), the longest commute time since the census began measuring one-way commute times in 1980.
While many essential medical workers and production and supply chain employees have certainly still been getting themselves to a physical work place each day; Gallup reports that up to 62% of the workforce has been doing a different kind of commute during the pandemic…down the hall. Sometimes in pajamas.
As summer winds down, many companies are determining their in-office policies for the rest of the year, and for many organizations, keeping their remote workforce at home is a priority to keeping their employees safe.
Let’s take a look at how commuter benefits should be handled in the wake of all these changes…but first, we’ll start with a commuter benefits primer.
Commuter Benefits and Taxes
Commuter benefits are pre-tax benefits (IRS 132) offered by many employers to help their employees offset costs associated with commuting or parking for work. While some companies subsidize a portion of that benefit, others allow employees to set aside funds in a pre-tax account to use for eligible commuting expenses.
The IRS specifies the monthly contribution maximum for both transit and parking, which is currently $270/month for each (2020). Eligible transit expenses include bus, train, subway, ferry and commercial vanpool/carpool options (including UberPool and Lyft Shared) to get to/from work. Eligible parking expenses include fees paid for parking at a mass transit site or parking at/near an employee’s place of work.
Employer Significant Savings
Employers can save up to $41 per month on payroll taxes for each participating employee. For geographical regions where commuting is available or paid parking is the norm, this savings can really add up.
- 100 active employees x $41/month x 12 months = $49,200 in payroll tax savings annually.
Mandated Benefits
In addition to the bottom-line benefit of this offering, more and more cities and even states are now mandating that employers offer commuter benefits—each city and state listed here has its own parameters, but if you have employees who WORK in these locations, you may be required to add these benefits to your benefits package:
- San Francisco, CA
- Berkeley and Richmond, CA
- San Francisco Bay Area, CA
- New York City, NY
- New Jersey (state)
- Seattle, WA
- Los Angeles, CA (projected start date: January 2021)
Mid-COVID Commuter Guidance
If you have changed your on-site office policy to extend home-based work until 2021, consider reminding your employees to pause their upcoming monthly elections and/or any recurring fare/pass orders for commuter benefits. Be mindful of monthly deadlines to make these changes and do so before the deadline—often the 10th of the month BEFORE you use the benefit—so the employee should make the change by Sept. 10 to cancel an order for October.
Commuter benefits are not annual “use it or lose it” plans, and the money in the account will be available as long as the employee is active with the organization. It is also worth noting that accrued commuter funds cannot be refunded to the employee and are forfeited to the employer upon termination, so employees with unused benefits should be proactive in evaluating whether they need to maintain their elections or orders.
As we look to 2021, we can hope that offices may once again be buzzing, and trains may be full of commuters. Getting back to business as usual will require a kick-start of your commuter program or a refreshed look at why adding that program to your rewards package can help your organization’s bottom line while helping employees save on their commutes. Contact your consumer directed accounts provider or MyChoice Accounts for more information.
Commuter Benefits made easy with MyChoice Accounts – one card and one platform for all tax-advantaged accounts. Check out our solution sheet today.
