News Release

Rising Gas Prices Fuel Interest in Vanpools and Pre-Tax Transit Benefits

August 29, 2005

Expensive gasoline is fueling hot interest in vanpools. And new vanpool commuters are asking how they can take advantage of tax benefits enjoyed by mass transit commuters in cities like New York and Chicago.

"We're getting questions from both employers and employees— people who never bothered with mass transit benefits before," says Tom Guiler, vice president of Benefit Resource, which administers pre-tax benefit plans, including the popular eTRAC® Commute plan. The plan provides employees with easy, debit card access to their pre-tax transit and parking accounts through the eTRAC MasterCard®.

Qualified Transportation Expense (QTE) plans allow employees to save 30 to 40 percent on out-of-pocket expenses on certain transit and parking expenses associated with their commute to work—by paying those costs with pre-tax dollars. Commonly used in major cities by commuters who take mass transit, the benefit is also available to employees who use vanpools.

"Concerned employers want to know the quickest way to add pre-tax transit and parking benefit options for their employees," Guiler says. "And they want to know about administration and outsourcing and, of course, the cost."

Employees have many questions:

Can they form a private carpool with friends or do employees have to use commercial or public transportation to get pre-tax benefits?
Can they use their health care flex accounts to cover mass transit expenses?
What types of parking expenses qualify?
Must they submit claim forms and receipts?

Below, Guiler answers the most pressing questions from employers and employees concerning vanpools and pre-tax benefit plans:

Back to main press release page

Q: How can employers provide immediate tax relief to vanpool riders?

A: "QTE benefit plans can be set up almost immediately if employers choose to outsource benefit administration. For example, once employers contact us, employees can be setting up their pre-tax transit accounts within 30 days and saving 30 to 40 percent on out-of-pocket transit and parking expenses associated with their ride to work."

"Unlike pre-tax 'flex' plans that cover health care expenses and require annual enrollments, QTE benefit plans allow 'rolling' or monthly enrollment."

* * *

Q: What's the value to employers of outsourcing benefits administration?

A: "If an employer outsources to a company like ours, their role as a plan sponsor is virtually nil. We handle the education program, enrollment, individual expense planning, compliance issues, problem solving, everything. Ongoing administration for the employer is reduced to the exchange of electronic files—a task that takes minutes each month."

* * *

Q: What's the administrative cost for employers?

A: "That depends on employee participation. Employers reduce payroll taxes—FICA—on any dollars employees contribute to pre-tax benefit accounts. The more employees participate, the greater the employer's tax savings. Participation rates for the eTRAC Commute plan administered by Benefit Resource are among the highest in the benefits industry and average between 60 to 70 percent. So, for most of our corporate clients, the tax savings more than offset the cost of administering the benefit."

* * *

Q: Can employees form a private carpool with friends or do they have to use commercial or public transportation?

A: "Under the law, expenses can be paid under a QTE plan if employees ride to and from work in a commuter highway vehicle that seats at least six people, not counting the driver, and if 80 percent of the annual mileage for that vehicle is for the purpose of transporting employees between home and work. As a practical matter, employees may be better off investigating one of the many public and private vanpool operations, including those run by rental car agencies, in their area."

* * *

Q: Can employees use their health care "flex" accounts to cover qualified transit and parking expenses?

A: "No. Although both types of accounts are funded by employee contributions through payroll deductions, employees must set up separate accounts to participate in health care 'flex' and QTE benefit plans sponsored by their employers."

* * *

Q: How much can employees set aside in pre-tax transit accounts?

A: "The IRS sets individual contribution limits of $105 per month for qualified transit expenses and $200 per month for qualified parking expenses."

* * *

Back to main press release page

Q: What type of parking expenses qualify?

A: "Essentially, parking expenses at or near the employee's workplace or at or near the employee's commuting hub. For example, parking fees associated with a park-and-ride program qualify. However, residential parking fees are excluded. You can't use pre-tax dollars to pay for parking near your home."

* * *

Q: Do employees have to submit claim forms?

A: "This is an important issue for employees who often dread filling out claim forms as much as they dread filling out tax forms. The good news is that employees can use payment cards like our convenient eTRAC MasterCard to pay for vanpool and parking fees with pre-tax dollars. Our software ensures that the card can be used only for qualified purchases. The eTRAC MasterCard is widely accepted and speeds the transfer of funds from customers to service providers like vanpool operators. Cardholders are protected from unauthorized purchases if their card is lost or stolen. And employees can use a secure feature at our web site (www.BenefitResource.com) to view all their account activity—what goes in, what goes out—and edit their account preferences. Employees can even add after-tax contributions to their accounts for purchasing convenience.

"We're very proud of the convenience and security associated with the eTRAC MasterCard. We think it?s the most innovative and employee-friendly benefit card in the industry. It certainly makes vanpooling easier for newcomers."

* * *

About Benefit Resource Inc.

Benefit Resource, Inc., based in Rochester, NY, administers pre-tax benefits for more than 1,000 companies in New York City, upstate New York, Boston, Chicago, Philadelphia and Washington, DC. Unlike payroll or human resource companies, Benefit Resource www.BenefitResource.com focuses solely on administration of pre-tax employee benefits—for health care, dependent day care and mass transit.