As the years roll on and the working environment continues to change, it's important to evaluate whether commuter benefits still hold value for employees and employers alike. This article explores the current state of commuter benefits, the types of benefits being offered and the pros and cons associated with them.
The current state of commuter benefits
Commuter benefits are designed to help employees save money on their daily commute to and from work. These benefits typically allow employees to set aside a portion of their pre-tax income to pay for eligible transportation expenses, such as public transit fares and parking fees. The IRS has set the monthly exclusion for qualified parking and commuter highway vehicle transportation and transit passes at $325 for 2025 (limits are updated yearly).
1. Pre-tax transit benefits: Employees can use pre-tax dollars to pay for public transportation expenses, including bus, train, subway and ferry fares. This benefit helps reduce the overall cost of commuting and can be a significant financial relief for employees who rely on public transit.
2. Pre-tax parking benefits: Similar to transit benefits, employees can use pre-tax dollars to pay for parking expenses. This benefit is particularly useful for employees who drive to work and need to pay for parking in urban areas.
3. Employer-subsidized commuter benefits: Some employers offer subsidized transit and parking benefits, providing employees with free or discounted access to commute to and from work. This benefit encourages the use of mass transit and parking that can help reduce traffic congestion and environmental impact.
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4. Vanpooling programs: Employers may offer vanpooling programs, where employees can share rides to work in a company-sponsored van. This benefit promotes carpooling, reduces the number of vehicles on the road and can lead to cost savings for employees.
5. Bike commuting reimbursements: Although the exclusion for qualified bicycle commuting reimbursements is suspended until 2026, some employers still offer reimbursements for bike-related expenses, such as maintenance and gear. This benefit encourages eco-friendly commuting and promotes a healthy lifestyle.
Pros of commuter benefits
- Cost savings: One of the most significant advantages of commuter benefits is the cost savings for employees. By using pre-tax dollars to pay for transportation expenses, employees can reduce their taxable income and save money on commuting costs.
- Increased employee satisfaction: Offering commuter benefits can improve employee satisfaction and engagement. Employees appreciate the financial relief and the support from their employer in managing their daily commute.
- Environmental impact: Commuter benefits that promote the use of public transit, carpooling, and biking can help reduce traffic congestion and lower carbon emissions. Employers can contribute to a greener environment and demonstrate their commitment to sustainability.
- Recruitment and retention: Commuter benefits can be a valuable tool for recruitment and retention. Prospective employees may be attracted to companies that offer comprehensive benefits packages, including commuter benefits. Existing employees are more likely to stay with an employer that supports their commuting needs.
Cons of commuter benefits
- Administrative complexity: Implementing and managing commuter benefits programs can be administratively complex. Employers need to ensure compliance with IRS regulations and may require additional resources to administer the benefits effectively.
- Limited applicability: Commuter benefits may not be applicable to all employees, especially those who work remotely or have flexible work arrangements. Employers need to consider the diverse commuting needs of their workforce and ensure that benefits are inclusive.
- Changing commuting patterns: There have been significant changes in commuting patterns, with many employees continuing to work from home or adopting hybrid work models. Employers need to adapt their commuter benefits programs to reflect these changes and ensure that benefits remain relevant.
- Cost to employers: While commuter benefits can lead to cost savings for employees, they may also represent an additional expense for employers. Subsidizing transit passes or offering vanpooling programs can incur costs that need to be weighed against the benefits.
Commuter benefits are a good choice for both employees and employers. They save money, increase employee satisfaction, help the environment and improve employee retention. With over 30 years of experience in managing employee benefits, Alight partners with HR leaders to design a benefits package (including commuter benefits) that fits the unique needs of the employees.
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