Should My Employees Have Commuter Benefits?

Employees can use transportation-related fringe benefits if their employer sets up a commuter benefits plan. This benefit enables employees to set aside pretax money to pay for transportation costs that are related to their work. But are transportation or commuter benefits required?

The short answer is: maybe.

Depending on where you live, these benefits may be required for employers to offer, such as:

• Employers in San Francisco, California, with 20 or more employees
• Employers in New York City, New York, with 20 or more employees who are full-time and nonunion
• Employers in Washington, D.C., with 20 employees or more
• Employers in Richmond, California, with 10 or more employees who work 10 hours per week or more on average

Each of the above cities has specific conditions under which commuter benefits should be extended. If you are unsure about whether you are required to offer this benefit to your employees, reach out to your local government to find out.

More about Commuter Benefits

Commuter benefits may be used to pay for costs related to transporting an employee to and from work and home. Expenses for parking and mass transit or public transportation (such as a bus, subway, ferry, train or carpooling) are included. 

There are contribution limits established for commuter benefits. In 2019, an employee is able to contribute up to $265 per month for parking expenses and the same amount per month for transit expenses. 

Everybody can save by offering commuter benefits. Qualified commuter benefits are tax-free, which benefits the employee by deducting the fees before taxes are withheld. This results in savings on employee taxes, including Social Security tax, federal income tax and Medicare tax. Employers can also save on their share of Social Security and Medicare taxes paid for the employee.