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The state of New Jersey enacted a commuter statute in March of 2020 that changed the requirements for organizations’ employer-provided commuter benefits.
Offering commuter benefits to employees is not required under federal law, but some cities and states, such as New Jersey, have enacted laws within the past few years that require employers to provide a commuter program.
The commuter benefit is a tax-free fringe benefit, authorized by the Internal Revenue Code 132(f), that allows your employees to pay for certain commuting costs using pre-tax money.
Good for you
Good for your employees
Good for the environment
Employees who switch from driving to taking public transportation can reduce their carbon dioxide emissions by up to 20 pounds a day and 4,800 pounds a year.
The pre-tax commuter benefit covers transit, parking, and vanpool and ridesharing costs, including:
Here’s an example:
An employee makes $55,000 a year. They spend $270 on their monthly train pass, and they buy 12 monthly passes each year. Since the pass is paid for pre-tax, the taxable income after federal income taxes will be reduced to $40,372, which means a savings of approximately $7002 for the year.
The New Jersey law requires employers with at least 20 employees in a New Jersey office to offer a pre-tax transportation benefit to their employees. The law excludes federal government employees and those who are currently covered by a collective bargaining agreement. Non-profits and state or local government employers are not exempt from offering the commuter benefit.
This law went into effect on March 1, 2020. Any company found in violation of the law after this date will have 90 days to comply with the law before any penalties are imposed.
The penalty for failing to comply with this commuter benefit law will be a fine of $250 per month.
Penalties are imposed per company.
If your company is fined for failing to comply with the New Jersey commuter benefit law, you will have 90 days to comply in order to avoid the penalty.
No, they just have to work in the state of New Jersey.
Yes, you can.
Any company that doesn’t comply during the 90-day violation window will be charged with a subsequent violation and will have to pay an additional $250 penalty every 30 days until compliance is completed.
The Department of Labor and Workforce Development will enforce the legislation.
While the New Jersey law does not require you to offer this benefit outside of New Jersey, there are several city ordinances requiring employers to offer a commuter benefit. Commuter benefits are currently required by law in:
It depends on whether you have offices in New Jersey. If you have 20 or more employees that work in a New Jersey office, then yes, the law applies to your company.
If employees don’t want to take advantage of saving on their commuting costs with commuter benefits, that is their choice. You only need to offer a commuter benefit program.
Partner with an experienced commuter benefit provider who will assist you with every step of the process of implementing a successful commuter benefit program.
Our partner, Edenred Commuter Benefit Solutions, is the nation’s leading provider of commuter benefits, serving over 12,000 organizations and 8 million eligible employees.
Encourage the use of mass transit and reduce your organization’s impact on traffic and pollution.
Optional automatic reordering provides commuter benefits to employees each month.
As work demands change, so can your commuting selections. Our easy-to-use, mobile-friendly website allows instantaneous changes to your choices.
Access to transit passes for top 25 metropolitan markets, including 4,400 different products accepted at 460 transit agencies, and 2,000 parking providers accepted at over 5,000 parking and vanpool locations nationwide.
We offer pre- and post-tax commuter benefit purchasing options and can support employer subsidies to help your people transform their trip to work.
Disclaimer: Alight is not a law firm and does not provide legal advice to clients; you should seek advice of counsel in developing a plan to comply with city/state requirements applicable to provision of commuter benefits.
1. Qualified UberPooL and Lyft Shared rides apply to vehicles with a seat capacity of at least 6 more adults (not including the driver).
2. Estimated employee savings are for informational purposes only and are based upon monthly pre-tax deductions of $270 for the 2020 tax year. Individual savings may vary based upon income, individual tax rates, state of residence and other factors. Please consult your tax advisor.
3. Edenred, Alight’s Commuter Benefits partner, is partnered with UberPool, Lyft Shared and Via to name a few. These services are qualified expenses when purchased with your commuter benefits prepaid debit card.