The growing popularity of commuter benefit programs

Save with commuter benefit programs

Employers are always seeking new ways to boost employee morale, job satisfaction and retention. A great new way to accomplish these three goals is by providing pre-tax commuter benefit programs (CBP), which is why these arrangements have seen such significant popularity growth in recent years. Read on to learn more about why commuter benefit programs are becoming a hallmark of countless companies’ offerings.

Saving money

“A CBP can provide up to 40% tax savings for employees.”

Commuter benefit programs encourage the use of public transportation by allowing employees to pay for commuting expenses using pre-tax dollars. Established under Internal Revenue Code Section 132(f), the maximum tax-free election for qualified mass transit is $255 per month. This means a CBP can provide up to 40 percent tax savings* for employees.

To qualify under a CBP, the mass transit must:

  1. Occur in a commuter highway vehicle, such as a bus, train, subway, vanpool, etc.
  2. Only be used for traveling between home and work.

Participants can also put aside pre-tax money for eligible workplace parking expenses. This includes:

  1. Employer-granted parking at or near the business.
  2. At or near a ride-n-share location by the mass transit.

With these programs in place, employees save money while also avoiding traffic. Perks like this improve job satisfaction and boost employee retention.

CBP benefits beyond your wallet

Saving pre-tax money is the biggest incentive for employees to use a CBP, but it’s not the only motivating factor. Moving beyond pure financial incentives, employers also cited a wide range of reasons driving participation in the program and the attendant benefits derived from them, according to the 2016 Benchmark from Best Workplaces for Commuters. These included, in descending order:

  • Decreasing traffic congestion.
  • Meeting with local or state regulations for trip reduction or growth management.
  • Lowering air pollution.
  • Reducing parking demand.
  • Improving workplace flexibility/work-life balance.
  • Responding to employee requests for commuter programs.

Clearly, there’s a bevy of benefits from using CBPs.

Local legislation is bolstering CBPs

Perks like CBP can improve job satisfaction and boost employee retention.”

In some places, city governments have passed legislation mandating employers provide commuter benefits programs for their workers, further increasing participation in these plans.

New York City is a prime example. The city’s Commuter Benefits Law took effect Jan. 1, 2016, and requires any employer with 20 or more full-time employees to offer a pre-tax commuter benefit program. Washington, D.C. and many municipalities in the San Francisco Bay Area have also passed similar legislation.

In some places, these pre-tax benefits cover ride-sharing programs, such as Shared Rides.

Boosting awareness among employees

Despite the variety of motivations and perks derived from using CBP, there is still a lack of participation among employees. One of the biggest obstacles? A simple lack of awareness.

After introducing the programs, it’s important for employers to keep them top of mind for workers so they can take advantage of the benefits. Some employees will forget to sign up while others might not understand the full impact of the savings, while greater awareness will drive up participation rates significantly.

Employers should ensure they’re taking steps to educate employees on the benefits and raise awareness of commuter benefits through email campaigns, flyers, seminars and more.

Click here to learn more about Commuter Benefit Programs.

*40% savings is based on a combined income tax rate of 40% for Federal, State and Local taxes. Individual savings may vary based on your personal tax rates.