Transit & Parking

Section 132 Transportation Plans:
Parking and Transit reimbursement accounts provide an additional benefit for your commuting workforce.

Employers have long utilized employee benefit plan packages as a means of increasing employee compensation without increasing costs to the employer. Employers with work sites in urban locations can institute a plan that allows reimbursement of certain commuting expenses with pre-tax dollars under a Section 132 Transportation Plan.

Such a plan allows employees to contribute money to transportation accounts for reimbursement of commuting expenses with pre-tax dollars, thus saving money on taxes. The employer benefits as well through payroll tax savings. This non-traditional employee benefit plan can be coupled with your existing plans to increase the pre-tax benefits available to your employees.

How it Works
Employees elect to have a certain amount of their compensation redirected to the plan from each pay period. When the employee incurs eligible expenses, the employee then submits those expenses to the plan for reimbursement from the employee’s individual account(s). The contribution is made before federal taxes are withheld, and the reimbursement is not a taxable form of compensation.

The Types of Plans
There are essentially two types of plans. The first is a Transportation Reimbursement Account. Reimbursable expenses from this account include mass-transit (subway and train tokens and passes, bus and ferry fares and passes) and vanpooling commuter vehicle expenses associated with travel to and from work.

The second is a Parking Reimbursement Account. It covers daily work-related parking expenses, including parking fees associated with parking at a location for access to mass-transit or vanpooling sites.

Unfortunately, there are some specific expenses that are not covered: Bridge tolls, road tolls, gasoline, carpooling expenses, residence parking expenses and spouse or dependent expenses are not eligible for reimbursement.

Dollar Limitations
For Transportation Reimbursement Accounts, employees can contribute up to  $120 pre-tax per month for the first three months of the 2009 calendar year. The American Recovery and Reinvestment Act of 2009, also referred to as the Stimulus Bill, temporarily increases the amount of 132 transit pass and vanpooling benefits. This increase, effective from March 1, 2009, increases the combined transit pass/vanpooling limit to $230 (from $120.00) for the remainder of 2009. For a Parking Reimbursement Account, the limit is $230 per month for the entire year. These limits increase annually under the IRS Code.

Tax Advantages for the Employer
For employers, amounts contributed by an employee to a Parking or Transit Reimbursement Account are not subject to FICA taxes.

Some Important Facts
Although Commuter Reimbursement Accounts provide a benefit to your employees, they are not subject to the restrictions of ERISA. Other plans, such as flexible spending accounts, dependent care accounts and/or health reimbursement accounts, are required to be ERISA compliant.

There is no “Use-It-or-Lose” it feature to these accounts. Positive balances in employees’ accounts can be carried over indefinitely to future payroll periods without forfeiture.

Unlike cafeteria plans, employees can adjust the contributions to their Parking and Transit Plans from month to month.