Coming in January: NYC Employers Must Offer Pre-Tax Transit Benefits

Does your company have 20 or more full-time employees who work in New York city?

If you answered yes to this question, regardless of where your company is headquartered, you may be required to offer pre-tax transportation benefits to those full-time employees who work in New York city, as of January 1, 2016, the effective date of the Affordable Transit Act, which was signed into law by Mayor Bill de Blasio last year. Employers will have a 6-month grace period to comply.

Does Your Company Need to Comply?

Employers with 20 or more full-time employees who work in the city of New York are subject to this requirement, unless you are:

  • A Federal government employer
  • A New York state government employer
  • A New York city government employer
  • A unionized employer, with fewer than 20 non-union employees
  • An employer exempt from federal, state, or city payroll taxes

There is also a hardship waiver available, if you can demonstrate that offering the benefit would be a financial hardship for your company.

Which Employees Are Eligible?

If you must comply with the law, you’ll need to offer the transportation benefits to all full-time employees. For purposes of the law, a “full-time employee” means an employee who works an average of 30 hours or more per week for the employer. In addition, if you reduce your number of full-time employees to less than 20, any employees who became eligible for the benefit before the reduction will remain eligible for the benefit for the duration of their employment with your organization.

Required Benefit

If your company is subject to the Affordable Transit Act, you must offer your eligible employees the opportunity to use pre-tax earnings to purchase qualified transportation fringe benefits in accordance with federal law.

Under current federal law, this means you’ll be required to establish a Qualified Transportation Plan pursuant to Section 132(f) of the Internal Revenue Code, if you do not already one. These plans enable employees to reduce their taxable income in the amount of qualified transportation expenses, generally through spending accounts that are funded through payroll contributions. For the purposes of this law, however, parking expenses and bicycle commuting expenses are not considered to be qualified expenses.

Section 132(f) qualified transportation benefits include:

Benefit Monthly Limit in 2016 Must be offered in NYC
Expenses for transportation in a commuter highway vehicle (Vanpooling) $130 per month Yes
Transit passes $130 per month Yes
Qualified bicycle commuting reimbursement $20 per month No
Qualified parking expenses $255 per month No

Penalties

For violations that occur on or after July 1, 2016, you will be subject to a minimum fine of $100 (up to $250) for each 30-day period that the employer failed to comply. For the first violation, the employer will have a 90-day period to cure the violation before the fine will be imposed. No penalties will be issued for violations occurring before July 1, 2016.

Questions?

If you have questions about these new requirements or about Section 132(f) plans, contact Bell Associates at 203-707-1300 or email info@bellassoc.com. You can also visit us at www.bellassoc.com.

This article refers to regulations issued through November 15, 2015.  It is intended to be a summary of important issues and should not be considered legal or tax advice.

© Bell Associates and “Ask the Professionals,” 2015. Unauthorized use and/or duplication of this material without express and written permission from Bell Associates is strictly prohibited. Excerpts and links may be used, provided that full and clear credit is given to Bell Associates and “Ask the Professionals” with appropriate and specific direction to the original content.

 

 

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