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Transit Benefits: In-house vs. Third-party Management

Transit Benefits

It is not uncommon for employers to raise the question: ‘Should we manage our commuter benefits program in-house or should we use a third-party?‘ If you are considering managing a mass transit program in-house, there are a number of factors to consider:

How will the benefit be accessed?

The benefit must provide direct access to mass transit fare media. Examples include access through a pass fulfillment program or restricted use benefits cards. As of January 1, 2016, claim reimbursement is not an accepted option for managing a mass transit benefit.

Time to administer?

The most common method to administer mass transit benefits in-house is to purchase and distribute passes to employees. This can be a time-consuming activity to take orders from employees, order passes (potentially from multiple transit agencies, depending on the specific commuting needs of employees), and distributing those passes.

Up-front funding?

In most cases, employers are fronting the cost to purchase the passes and collecting the funds from employees. This can affect cash flow and requires detailed reconciliation processes.

Lead times?

There are often cut-off dates for submitting pass orders. This may be more than a month prior to the intended use. Employees’ needs may change or the employees themselves may change; leaving employers to foot the bill for unused passes.

Regulatory changes and product expertise?

When you administer a plan in-house, you typically do not have someone in your corner updating you on changes to the law, advocating to improve the benefit or providing general guidance on the benefit.

Cost?

Cost is typically the driving factor for in-house administration. Often employers only look at the hard cost of using a third party and do not consider the labor and resource trade-offs associated with managing the program in-house. A third-party will administer the benefit for each employee for about the cost of a cup of coffee each month.

While in-house administration is a feasible option for some employers, more and more employers are relying on administrators, like Benefit Resource, to manage their commuter benefits program, allowing them to focus on their business.