Risk & Business Magazine JGS Insurance Magazine Fall 2019 | Page 6

COMMUTER BENEFITS
New Jersey Requires Employers To
Offer Pre-tax Commuter Benefits
O
n March 1, 2019, Governor Phil
Murphy signed a bill into law
that will require New Jersey
employers with 20 or more
employees to establish pre-tax
transportation fringe benefit programs.
Although many employers voluntarily offer
these benefits, New Jersey is the first state to
require employers to provide them for their
employees. dollars are exempt from federal income taxes
and Social Security taxes.
Transportation fringe benefit programs allow
employees to set aside pre-tax dollars for
certain work-related commuting expenses.
The New Jersey law requires these programs
to provide benefits for transit passes and
vanpooling expenses, although employers
may also include qualified parking. — Qualified parking: $265 per month
Covered employers must offer these benefits
by March 1, 2020. New Jersey employers with
20 or more employees should start taking
steps to implement a pre-tax commuter
benefits program. Employers should also
watch for regulations from the Department
of Labor and Workforce Development.
TRANSPORTATION FRINGE BENEFIT
PROGRAMS
MAXIMUM BENEFIT LIMITS
Federal tax law establishes a maximum
amount of transportation fringe benefits
that employees can exclude from income
for tax purposes. These limits are subject to
annual increases for inflation. For 2019, the
maximum benefit levels are:
— Vanpooling and transit passes (combined):
$265 per month
QUALIFIED EXPENSES
Transportation fringe benefit programs can
provide benefits for qualified parking, transit
passes, and rides in commuter highway
vehicles (vanpooling).
QUALIFIED PARKING — Parking provided to
employees at or near the employer’s business
premises. It also includes parking on or near
the location from which employees commute
to work using mass transit, commuter
highway vehicles, or carpools.
New Jersey employers that are subject to the
state’s unemployment compensation law
and have at least 20 employees must offer all
of their employees the opportunity to elect
pre-tax benefits for qualifying transit passes
and vanpooling expenses. The program
must allow employees to elect benefits at the
maximum level permitted by federal law. TRANSIT PASSES — Any passes, tokens,
farecards, vouchers, or similar items that
allow employees to ride free of charge (or
at a reduced rate) on mass transit or in a
vehicle that seats at least six adults (excluding
the driver) if a person in the business of
transporting persons for pay or hire operates
it. Mass transit may be publicly or privately
operated and includes bus, rail, or ferry.
Internal Revenue Code Section 132(f) allows
employees to use pre-tax dollars to pay for
certain work-related commuting expenses.
These expenses include qualified parking,
transit passes, and vanpooling. These pre-tax VANPOOLING — Transportation between
the employee’s residence and place of
employment in a commuter highway vehicle
that seats at least six adults (excluding the
driver).
COMPLIANCE DEADLINE AND PENALTIES
New Jersey’s commuter benefits law became
effective on March 1, 2019. However, no
penalties will be assessed against employers
until March 1, 2020, unless the Department
issues regulations that include an earlier
compliance deadline. Also, a special timing
rule applies to collectively bargained
employees. Covered employers must offer pre-
tax commuter benefits to their collectively
bargained employees when their collective
bargaining agreements that were in effect on
March 1, 2019, expire.
Employers that fail to offer pre-tax
transportation fringe benefits as required
by the law may be subject to penalties. First
violations can trigger penalties between $100
and $250. Employers will have 90 days to
offer a pre-tax commuter benefits program
before the penalty is imposed for a first
violation. After that 90-day period, employers
can be subject to a penalty of $250 for each
30-day period of noncompliance.
BY: BARRY E. FIELDS
VICE PRESIDENT OF EMPLOYEE BENEFITS
JGS INSURANCE
Barry Fields has over 29 years of employee
benefits experience advising clients in a
wide range of industries, professional and
industrial, public and private, throughout
the United States and worldwide.
Barry specializes in providing full-service
benefits consulting to clients including
program design, compliance, plan
funding, underwriting, wellness programs,
employee communications, benefits
administration, employee advocacy and
the use of effective strategies in benefits
management.
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