COMMUTER BENEFITS
PRE-TAX COMMUTER BENEFIT REQUIREMENT
Effective March 1 , 2020 , a New Jersey law required employers with 20 or more employees to establish pre-tax transportation fringe benefit programs for their employees . New Jersey was the first state to pass a law of this kind .
Transportation fringe benefit programs allow employees to set aside pretax 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 .
TRANSPORTATION FRINGE BENEFIT PROGRAM
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 .
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 dollars are exempt from federal income taxes and Social Security taxes .
New Jersey ’ s commuter benefits law became effective on March 1 , 2019 , with penalties against employers for noncompliance beginning March 1 , 2020 . 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 .
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 2022 , the maximum benefit levels are as follows :
• Qualified parking : $ 280 per month
• Vanpooling and transit passes ( combined ): $ 280 per month
QUALIFIED EXPENSES
Transportation fringe benefit programs can provide benefits for qualified parking , transit passes , and rides in commuter highway vehicles ( vanpooling ) as detailed below :
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 .
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 .
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 ).
ENFORCEMENT AND PENALTIES The state Department of Labor and
Workforce Development is responsible for ensuring that covered New Jersey employers provide pre-tax transportation fringe benefits . 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 .
MORE INFORMATION
Contact JGS Insurance for more information on the New Jersey pre-tax commuter benefit requirement . +
BY : BARRY E . FIELDS VICE PRESIDENT OF EMPLOYEE BENEFITS JGS INSURANCE , A BALDWIN RISK PARTNER
Barry Fields has over 30 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 .
5