NJ Commuter Benefit Law
Not everyone is lucky enough to work from home every day, or even a few days a week. Though more companies are implementing work from home days, most employees are still required to commute to and from work, multiple days a week, and commuting to and from work costs employees money. Commuters aren’t just spending money on gas, but also busses, trains, ferries, parking and more. To help assist with these costs, some employees, depending on location, company size, and means of transportation, may be eligible to participate in what is known as commuter benefits.
Commuter benefits take the cost of an employee’s commute and deduct the total, before taxes, from the employee’s pay. The coverage begins at a minimum of $10. The benefits do not cover the total cost of transportation; however, as the maximum amount an employee can save per month on either transit or parking, which are considered separate expenses on different accounts, it is $265 each. With a potential total of $530 in saved money, by using pre-taxed dollars, employees can save around 40 percent on commuting.
This benefit does not cost employers anything; in fact, it saves them money too. The benefit lowers overall payroll tax, saving employees up to $41 per month per employee. If an employer has 60 participating employees, they can save almost $30,000 per year.
Surprisingly, as of 2019, there is only one state that requires commuter benefits. That state is New Jersey. Law S.1567, An Act Concerning Pre-Tax Transportation Fringe Benefits, was passed and signed into law in early 2019. Though the law was officially put into effect on March 1st, 2019, the regulations are not mandatory until 365 days later, or March 1st of the year 2020. This means that before March 2020, employers will not be fined for if they do not comply with the law. The date is subject to change; however, depending on when and if the Commission of Labor and Workforce Development announces a valid date.
Once in full effect, employers that fail to comply can face penalties anywhere from $100 to $250 for the first violation. Before the penalty is fully enforced, employers have a 90-day opportunity to offer the pre-tax fringe to the participating employees. For each additional 30 days following the initial 90 day period, an additional $250 penalty will be owed by the employer.
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Who and by what means of commuting does this law apply to? Companies required to offer commuter benefits are those with at least 20 employees that are employed in New Jersey, including state and local government employers. Those exempt from providing the pre-tax benefit include federal government employers and those subject to collective bargaining agreements (CBA). Federal workers already receive pre-tax transit benefits under Federal guidelines. Employees under a CBA may be eligible for the benefits after the contracts they were involved in expire.
Not every commuter will be able to get money back from their company by only driving to work. Employees that drive themselves to and from work in a vehicle occupied by one person are not eligible for the benefit. Forms of commuting that are covered under Transit Benefits include public transportation (such as trains or busses), vanpools, ferries, and even bicycling. Transit passes may be from private, or public operated mass transit companies.
Vanpooling is transportation in a commuter highway vehicle that seats at least six adults, excluding the driver. This excludes refunds for cabs or driving services such as Uber. However, ride-sharing such as UberPOOL and Lyft Line can qualify. Bicycling is not a pre-tax reimbursement, but some bike maintenance and repairs can be covered.
Parking is the other expense covered by the Commuter Benefits Law. This includes parking on, or near, the business’s premises that are provided to employees. Parking near a location from which the employee commutes to work also qualifies. For example, if an employee park at a train station to take the train to work, he or she is eligible to receive the pre-tax benefit for the parking fee.
The Commuter Benefits Law does not cover expenses such as tolls, gas, mileage, business trip costs, airport parking fees, and residential parking fees. Though the law does not cover these, many companies offer reimburses for these expenses.
With less than half a year left before the law is enforced, employers should start looking into Commuter Benefit plans if they have not already. Their current benefit plans will have to change to comply with the law. Employers can look into third-party vendors for more information and plans to choose from. It is a good idea to monitor the progress of the Law in case it becomes enforced sooner than March 1st, 2020!
Employers should be prepared to answer questions from employees regarding what is offered and eligible under the Commuter Benefits Law. Developing a document to inform employees on the matter is highly recommended. The Law requires the New Jersey Transit Corporation, the New Jersey Turnpike Authority, and the South Jersey Transportation Authority to work together in conducting a campaign to make the public aware of the law. The campaign hopes that employees contact employers on the matter.
Though New Jersey is the only state to mandate a Commuter Benefits Law statewide, other cities have similar laws. Two big cities that have Commuter Benefit Laws include New York City and Los Angeles. Seattle is set to join these cities in 2020.
The Association for Commuter Transportation is an international association that advocates for commuter benefits. The ACT has a campaign called, “25 by 20 Transit Benefits Ordinance Campaign.” The goal of this campaign is to have 25 governments pass commuter benefit regulations by the end of the year 2020.
As outlined above, Commuter Benefit Laws offer advantages to employees and employers. These laws also benefit the environment as a result. The benefits may encourage employees to take a form of mass transit, rather than driving their vehicles to work every day. This allows for less pollution in the air and a smaller carbon footprint.
After seeing the results New Jersey employees and employers receive from the Commuter Benefits Law, it should only be a matter of time before other states pass the same or similar laws, too.