Commuter Benefits (also known as Qualified Transportation Benefits) are used to save participants money when they travel to and from work. Pre-tax coverage is available for transit, parking and/or bicycling* expenses. Employers may even fund these directly as an added incentive to attract or retain quality employees.
How Commuter Benefits Work:
There are several forms of commuter benefit available – vanpooling, transit passes, parking and bicycling. Transit passes and vanpooling share a single reimbursement limit, while parking and bicycling expenses have individual reimbursement limits. Participants may elect monthly coverage for vanpooling, transit and parking, and may receive any combination of those benefits during the same month, so long as he or she receives no more than the applicable statutory limit for each type of benefit. Bicycle expenses may only be reimbursed in a month where no other form of commuter benefit is reimbursed; expenses can include purchase, improvement, repair or storage of a bicycle when used for travel to and from work.
Funding of chosen benefits can be handled in one of three ways. In the first method the employer may provide a contribution toward its employees transportation costs. In the second method employees may elect to set aside a pre-tax amount from their paychecks to cover expenses. The last option is a combination of the first two, in which an employer pays a portion and the participant funds the rest of the cost through pre-tax dollars. None of these options may exceed the limits established by the Internal Revenue Service (IRS).
Reimbursement may be made by check, direct deposit, or at the point of sale through the use of a debit card. Expense substantiation and other reimbursement rules must be followed; cash advances are not allowed.
The Advantages of Commuter Benefits:
There are significant tax savings with a commuter benefits plan. These tax benefits may increase as the cost of living increases.. Additionally, funding commuter benefits with pre-tax dollars reduces the overall taxable income of participants.
Whether used for subway passes, to cover the expense of a new bicycle or just paying for parking, a commuter benefits plan can save money.
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