It's a great year to be a commuter in Philadelphia! A recently enacted ordinance requires employers to offer commuting benefits for rides on all SEPTA buses, trolleys, subways, and trains.
But why would Philadelphia offer such a thing? Sure, it will lead to increased ridership, which will in turn lead to increased revenue for public transport, but what it's really doing is making public transportation more affordable to employees through pre-tax dollars.
Before we jump into the specifics of the ordinance, let's learn why it saves you money.
The IRS allows employees to pull up to $300 pre-tax dollars from their paycheck – every month – to pay for commuting to and from work. That applies to you if you live in Philadelphia or in other cities and regions that have a similar ordinance in place.
The catch? The employer must allow you to do it. Unlike other fringe benefits, you can't simply claim it on your own.
What Philadelphia has done is to say, “You have to allow all eligible employees the right to claim commuter benefits”, which is setting aside up to $300 in pre-tax dollars to commuting costs every month.
Employers also save big when they offer commuter benefits
The great news for employers offering this benefit? If their employees aren't responsible for taxes on that $300 a month, neither are they.
What does that look like?
- If 50 employees participate over 12 months, the company can save over $24,000 annually.
But what does the Philadelphia ordinance actually say?
Talking about savings is exciting, but let's get down to the nitty-gritty of the new ordinance.
A new chapter has been added to the Title 9 of The Philadelphia Code entitled “Employee Commuter Transit Benefit Programs.” This chapter requires employers (who employ 50 or more “covered” employees) to offer a commuter benefits program that helps them cover the cost of taking mass transit to and from work.
They define “covered” employee in the following way:
- One who works a minimum of 30 hours per week and has done so for a minimum of 12 months at the same company.
- One who is not a government employee, unpaid intern, volunteer, or unpaid apprentice.
The employer has several ways they could go about implementing the new commuter benefits mandate:
- They can implement a mass transit fringe benefit plan compliant with Internal Revenue Code Section 132(f), or
- They can offer an employer-paid fare instrument equal to, or greater than, the IRS maximum non-taxable amount of $300, or
- A combo of both, and
- They are also required to offer employees who regularly use a bicycle to commute to and from work, a tax-free reimbursement up to $20 per month (or the current amount specified by IRS Section 132(f)).
Let's make the above simple. A company can allow an employee to set aside up to $300, pre-tax, from their paycheck, and leave it at that. Or they can choose to pay that amount and give you access to more “public transportation cash” above and beyond your $300. They can also choose to reimburse you up to $20 a month to ride your bike to work.
The easiest way to implement a functioning, compliant commuter benefits program
The last thing you want to do is assign some poor staff member the duty of buying public transportation passes for your 50 to 300 employees, passing them out, and then having them deal with the inevitable “lost” passes.
And if you don't want to do the passes, you probably also aren't interested in dealing with hundreds of travel reimbursement claims each month. Imagine the paperwork!
The easiest way to run your commuter benefits program is by offering your employees a prepaid card.
When your employees carry a commuter benefits prepaid card, they can simply reload their card at the beginning of every month from the comfort of your office. The card itself is “vendor limited” meaning it can only be used by vendors approved by your company. For example, if you live in Philadelphia, it can be used for SEPTA buses, trolleys, subways, and trains.
If you're wondering how to implement a compliant commuter benefits program for your business, the good news is Edenred is here to help.
Edenred is the leading commuter benefits provider in the U.S. and we know how to implement a seamless, compliant,and affordable commuter benefits program.
We provide prepaid cards backed by an online portal, mobile app, and gold star customer support. We handle everything so you don't have to!
Whether you are in Philadelphia and need help setting up your newly mandated program, or any other U.S. city or state, we'd love to show you how we can help. Schedule a meeting with us today to learn more.