| Parking & Transit Benefits | ||||||||||||
| IRS Code Section 132(f) was amended on January 11, 2001. Employers can adopt
a plan by which employees could elect to set aside money from their paychecks, on a pre-tax basis, to pay for "qualified
transportation expenses". The qualified expenses are defined as (1) Transportation in a commuter highway vehicle (vanpool, bus, rail, etc.) (2) Transit passes (3) Qualified parking The amounts that can be set aside is $100 per month for commuting and $190 per month for parking expenses. The maximum potential benefit is $290 per month or $3,480 per year. |
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| The "Commuter Choice" provision allows employees to reduce their gross income to pay for: | ||||||||||||
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| Vanpool
- any highway vehicle that has a seating capacity of at least six adults (excluding the driver) and meets the two
requirements for mileage us. At least 80% of the vehicle's mileage use must be reasonably expected to be for transporting
employees to and from work and the number of employees transported for commuting is, on average, at least one-half
of the adult seating capacity of the vehicle (excluding the driver). Transit Passes - Any pass, token, farecard, voucher or similar item that allows a person to ride free of charge or at a reduced rate. Mass transit, a vehicle that seats 6 adults excluding the driver and the person is in the business of transporting people, or subscription bus services operated for or by an employer. If a voucher program is available, employers cannot reimburse cash to employees. Qualified Parking - Parking employees use at or near work, or at or near where an employee may park in combination with mass transit, commuter highway vehicles such as a "park-n-ride" lot. |
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| Discrimination Tests The benefits may be provided to "any" or "all" employees. This means you can pay for the parking for corporate officers and no benefit for non-officers. You may use any combination, and it is completely up to the employer. Employers can provide the benefit monthly, or give the employees a bonus at the end of the year. |
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| Method of Payment Payments can be made through a transit pass/voucher program, or through cash reimbursements. Voucher programs must be used or receipts must be provided and cash reimbursements can be provided to employees. Employers could require copies of transit passes as proof of expense or some other reimbursement claim documentation. Cash advances may not be used. |
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| Cash Out Employers may offer employees the option to give up their parking and receive the taxable value as cash, a tax-free mass transit benefit or a combination of both. Note: The cash portion not used for qualified transportation is taxable to the employee and employers must pay full employment taxes on the amount included in the employees income. |
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| Excluded Employees Self-employed individuals, 2% or greater shareholders of S corporations, Sole proprietors and partners are not eligible for the exclusion, and should be including the benefit as a taxable fringe. This means that it is subject to employee and employer taxes. |
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| Plan Document The law has no plan document requirements. This means that employers should put together reasonable rules for this benefit which are applied uniformly to all employees using the above information as an outline for the plan. |
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| TEA-21 Fact Sheet : Transportation & Equity Act for the 21st Century | ||||||||||||
| IRS Summary on the Transportation Benefits | ||||||||||||