By Bill Holloway
The Bay Area Air Quality Management District and the Metropolitan Transportation Commission have launched a joint pilot program requiring employers with more than 50 full-time employees in the District’s nine-county area to offer one or more commuter benefits to their employees by the end of September 2014.
The program’s goal is to reduce greenhouse gas emissions and traffic congestion by giving commuters incentives to choose modes other than single-occupancy vehicles. Employers are required to offer one or more of the following four commuter benefit options to their employees:
- Pre-Tax Benefit – Allow employees to exclude up to $130 of their transit or vanpooling expenses each month from taxable income.
- Employer-Provided Subsidy – Provide a subsidy to reduce or cover employees’ monthly transit or vanpool costs, up to $75 per month.
- Employer-Provided Transit – Provide a free or low-cost transit service for employees, such as a bus, shuttle, or vanpool service.
- Alternative Commuter Benefit – Provide an alternative commuter benefit that is as effective in reducing single-occupancy commute trips as Options 1, 2 or 3.
According to MTC Chair, Amy Rein Worth, the Commission expects most employers to choose the pre-tax benefit option, which imposes no new costs on employers and provides flexibility to employees in whether and how they use the benefit. Both employees and employers are expected to benefit financially from the program. Employees could save up to 40 percent of their monthly transit or vanpool costs by excluding them from taxable income; and by reducing the amount of employees’ taxable income, employers reduce their own Social Security and Medicare payroll taxes.
Although Federal law prohibits employees from using their pre-tax dollars to pay for bicycle commuting costs, employers can choose to subsidize the cost of bike commuting as an alternative commuter benefit.
Bill Holloway is a Transportation Policy Analyst at SSTI.