news release — FACT Sheet

Payment Cards Improve Delivery of Transit Benefits

June 19, 2005

Managing benefits is a critical need for companies today. According to the Employee Benefit Research Institute, companies spend close to a trillion dollars on employee benefits and a growing number are offering a tax-free transit option.

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Regulations allowing employees to pay for mass transit and parking expenses with tax-free dollars are relatively new. Since their creation in 1998, companies have struggled to find cost-effective ways to administer transit benefits that allow commuters to cut out-of-pocket expenses by 30 to 40 percent. Some companies use cash reimbursement plans, which are paperwork-heavy, carry multiple restrictions and require receipts. Others distribute transit passes directly to participating employees, giving no flexibility to commuters with irregular travel schedules and causing workers to waste precious pre-tax savings. Check vouchers – another common option – carry an administrative burden and losing them is like losing cash.

Many employers, concerned about the inefficiencies of paper-based plans, have been reluctant to offer transit benefits to their employees. However, incorporating payment card technology has provided a cost-effective and convenient option, prompting increasing numbers of employers to offer the benefit.

Convenience and Flexibility on a Card

Benefit Resource, Inc. pioneered paperless pre-tax benefits. Founded in 1993, the company administers pre-tax benefit plans for health care, dependent care and mass transit. In 2000, Benefit Resource allied with MasterCard International to introduce the eTRAC® MasterCard®, a reloadable stored value solution that works with Benefit Resource’s eTRAC Commute plan. The eTRAC MasterCard, issued by M&T Bank, enables employees to access their pre-tax accounts with a swipe of the card. Patent-pending software developed by Benefit Resource ensures that the card can be used only for qualified purchases.

Download the Short Version: How eTRAC Commute is A Highly Evolved Way to Get to Work (PDF, 292 KB)

“The eTRAC MasterCard provides the greatest convenience, flexibility and security to employees while allowing them to pay more fares in pre-tax dollars than the other solutions,” says Tony DiBarnaba, president of Benefit Resource. “At the same time, it virtually eliminates the administrative burden for employers, cutting their labor and overhead costs by 15 to 20 percent, compared to the other transit benefit options, and providing the lowest administrative cost per employee.”

The card leverages the convenience, flexibility and security inherent in carrying a MasterCard card. In addition, cardholders are protected from unauthorized purchases if their card is ever lost or stolen.

“We are delighted to be working with Benefit Resource to offer innovative transit benefit programs that enable employers to replace antiquated paper-based benefits with cost-effective card-based automated systems,” said Ted Dargan, vice president, Stored Value Team Lead for the Americas, MasterCard International. “The eTRAC MasterCard offers employees convenience, budget tracking and security from fraud and theft – benefits that cash and check vouchers simply cannot match.”

More flexible than vouchers and pass distribution plans, the eTRACMasterCard allows employees to buy transit passes at ticket vending machines and to tailor purchases to their commuting patterns. Commuters with irregular travel habits avoid wasting precious pre-tax dollars. In addition, individual account information is available at the Benefit Resource web site www.BenefitResource.com where employees can use a secure feature to view their accounts and easily edit preferences.

How it Works

The prepaid eTRAC MasterCard works much like the gift cards shoppers find at their local mall. Employees decide how much – in pre-tax dollars – they’d like deducted from their paychecks for qualified mass transit and parking expenses. That amount is automatically loaded onto their eTRACcard. Workers can buy daily, weekly or monthly transit passes with a simple swipe of their eTRAC MasterCard.

The Benefits of eTRAC MasterCard

For employees, the prepaid eTRAC MasterCard provides:

Flexibility – commuters can chose the type of transit pass they want as well as where and when they would like to purchase their pass. They can use automated ticket machines, eliminating frustrating searches for staffed counters that accept check vouchers. In addition, the eTRAC MasterCard offers commuters to ability to use pre-tax dollars for all their transit purchase needs instead of relying on voucher checks with pre-set limits. Unused balances “roll over” into the next month.

Convenience – With the eTRACMasterCard, employees can enroll, view current balances and manage their accounts on-line. Although the government sets limits on monthly pre-tax transit and parking expenditures, workers can choose to add after-tax dollars to their payroll deductions so they can manage and monitor all of their mass transit costs on one account. In addition, users who participate in various mail-and-ride plans need register only once to automatically receive transit passes in the mail.

Security – A lost eTRACcard doesn’t mean lost dollars to employees. If a card is lost, the value remains in an employee’s pre-tax account; the card is easily replaced. Company plans that rely on cash reimbursement, transit pass distribution, and check vouchers leave employees vulnerable to loss or theft – a lost voucher means lost dollars.

For employers, the prepaid eTRAC MasterCard means:

Control – Patent-pending software from Benefit Resource ensures that tax-free dollars stored on an eTRAC Card can be used only for eligible purchases.

Reduced administrative costs – The card cuts administrative costs and allows a streamlined transfer of funds from customer to transit vendor. Companies that once devoted two or more days of staff time each month to plan administration can now spend less than an hour each month managing their eTRAC Commute plan.

Tax savings – The eTRAC MasterCard reduces employers’ payroll tax burden (FICA) on contributions employees make to their pre-tax accounts. In fact, the potential tax savings for employers are significant. Employee participation rates for the convenient eTRAC Commute plan typically range from 60 to 70 percent. These rates are generally 10 to 15 percent higher than participation rates for paper-based transit benefit solutions. In addition, the savings often more than offset the cost of plan administration.

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A pre-tax employee transit account – Qualified Transportation Expense Account (QTE) – allows employees to use tax-free dollars to pay for qualified workplace commuting and parking expenses. Employees save on federal taxes and state taxes (in most states) while reducing their out-of-pocket expenses for qualified mass transit and parking by as much as 30 to 40 percent. Companies reduce their FICA taxes – saving their 7.65 percent share of any money employees dedicate to their QTE accounts.

About Benefit Resource, Inc.

Benefit Resource, Inc. (www.BenefitResource.com) administers pre-tax employee benefit plans for more than 100,000 employees and 1,000 employers in Upstate New York, New York City, Boston, Chicago, Philadelphia and Washington, D.C. Unlike payroll or human resource companies, Benefit Resource focuses solely on administration of tax-free benefits. When there’s a question about pre-tax benefits – for health care, dependent care or transportation, Benefit Resource is the expert.