Commuter benefits are compensation perks to help employees save money by taking sustainable transportation, such as public transit, bicycling, rideshares in electric cars, and so forth. Commuter benefits allow employees to use pre-tax dollars on commuting expenses, which reduces their taxable income.
Commuter benefits can also be advantageous for employers. They can make compensation packages more attractive to new employees, save money on payroll taxes and parking lot costs, and boost workplace morale and productivity.
A comprehensive commuter benefit plan is worth considering for the economic and environmental benefits it can bring.
How Commuter Benefits Work
Here’s an overview of how a commuter benefit plan is set up and executed.
How Are Commuter Benefits Set Up?
Commuter plans are usually offered as part of employee benefit packages. In most cases, they are presented to employees during open enrollment periods when they can opt in or out. In some cases, employers are required to offer commuter plans.
Setting Contribution Amounts
After signing up for the commuter plan, employees decide how much of their pre-tax funds to contribute each pay period. As of 2024, the IRS has set a monthly contribution limit of $315 for transit and parking expenses. An employee can choose to contribute $315 for transit expenses and another $315 for parking expenses per month if they wish. The contributions are usually deducted from employees’ paychecks.
Using the Benefits
Contributions to a commuter benefits plan are placed in a separate account and can be accessed with a debit card or voucher. Employees can then use the funds to pay for sustainable means of transit, including:
Buses
Subways
Trains
Vanpool services
Ridesharing
Carpools
Commuter benefits may also be applied to nearby parking spots and tolls.
If an employee’s commuter account has leftover funds at the end of the company’s fiscal year, they can usually be rolled over into the account for the following year.
What Are the Perks of Commuter Benefits for Employees?
Commuter benefits are an attractive perk for your workforce. Here are some positives employees may enjoy in a commuter benefits plan.
Saving Money
Contributions to a commuter benefits plan are made before taxes. This means employees’ taxable income decreases, resulting in a tax break. In some tax brackets, savings can grow considerably quickly.
Fund Rollover
Commuter funds roll over from year to year and are not “use it or lose it.” However, unused commuter benefits funds will be returned to the employer if an employee leaves the company. Per IRS regulations, employers cannot refund unused commuter benefits funds to employees.
Easing Stress
When highway and street traffic are jammed, drivers become susceptible to stress and tension. If they add parking lot charges, they’ll be financially stressed as well. With a commuter benefits plan, employees don’t have to worry about making decisions on the road and can dramatically reduce their commuter costs.
Easy Access to Funds and Flexible Choices
Commuter benefits funds are accessible with a valid debit card or a transportation voucher. This is far more convenient than finding enough money for public transit. The sheer number of transportation options gives employees a broad range of choices for using their commuter benefits funds.
Helping the Environment
Mass transit, ridesharing, bicycling, and other sustainable methods can reduce air pollution, emissions, and traffic congestion. They also reassure employees who want to help protect the environment.
What are the Perks of Commuter Benefits for Businesses?
Commuter benefits plans offer considerable benefits to companies as well. In particular, employers can take advantage of the following perks.
Saving Money
Just as workers can save money on commuter benefits plans, employers can save on payroll taxes and employee contributions. These savings can add up quickly, especially for growing or large businesses. Employers can also save on parking lot expenses, including leasing and maintenance.
Competing in the Job Market
A commuter benefits plan in compensation packages can simplify the practice of attracting and retaining top talent. This advantage is especially beneficial in areas with expensive commutes.
Improving Company Morale
When employees feel that management cares for their needs, it can boost morale. Motivated employees are in turn more likely to increase productivity, collaborate effectively, and tackle workplace challenges.
State and Local Laws
Commuter benefits packages are not mandated by federal law. However, some state and local jurisdictions may require employers to offer them to employees. For instance, large metro areas like New York City, the Bay Area, and Seattle are more likely to have laws requiring that commuter benefits be available.
The basis for these requirements is almost always the number of employees a business has. In many cases, if a company has more than 20 employees on its payroll, it must offer commuter benefit plans.
This limit varies, however. Philadelphia and Chicago set a minimum of 50 employees, whereas Berkeley, California, mandates the option for businesses with just 10 employees or more. Check with local authorities to determine which requirements may apply in your area.
Look Into Commuter Benefits Packages
Commuter benefits plans can help businesses thrive, allow employees to save money and effort, and drive substantial environmental improvements. When managed effectively, commuter benefits plans can improve life both in and outside the workplace. With a comprehensive and generous plan in place, companies can effect change in a myriad of ways.
