Commuter Benefits in 2021: How They Serve Businesses and Employees

Commuter Benefits
December 6, 2021
Rana Good
Commuter Benefits

If your employees travel to work on a frequent basis, commuter benefits can help them pay for their transportation using pre-tax dollars no matter where you live in the United States (it’s in the U.S. tax code). Commuter benefits keep your business competitive, help keep your employees happy, and allow your business to save money.

Living in a world impacted by COVID-19, we have a new outlook on commuting, the workplace, and retaining employees. So what importance do commuter benefits have? We spoke to independent transportation consultant David Judd who’s worked with NJ Transit, the Port Authority of New York and New Jersey, commuter benefits vendors, and various bus operators about why commuter benefits are especially important today.

How do commuter benefits work?

Commuter benefits have been around since the 1980s but their prevalence doesn’t mean that everyone knows the ins and outs of how they exactly work. Even if as a business you have a commuter benefit program in place, now is a great time to re-evaluate or expand an existing commuter benefits package. “If your company doesn’t already have commuter benefits, they definitely should,” says Judd. “If they already do, they should be looking at bigger programs as a way to make employees comfortable with using transit again.”

Commuter benefits function much like a Flexible Spending Account (FSA) or Health Savings Account (HSA) in which an employee designates a pretax amount from their salary through an employer-provided benefit for commuting and/or parking.

Commuter Benefits Help You Save on Transit and Parking

Commuter benefits are broken up into two parts, transit and parking. Right now, the cap is $240 for transit fares and the same amount for parking benefits, so a total potential deduction of $540. The money you’ve allocated comes to you as a debit card, load to a mobile app, or your ticket is mailed to you. The deduction is made on a monthly basis and when you sign up through a third-party provider, their systems set the deduction as a recurring process.

Both Employees and Employers Can Save

It’s not just employees that have a financial upside from commuter benefits but also employers. Employers save the 7.65% they would otherwise pay for FICA on any subsidy they provide or on the tax-free amount the employee has deducted from their salary. This can amount to close to $200 per employee. “It doesn’t sound like a lot but if you have 1000 employees, it really is,” says Judd. On the employee’s end, the savings can amount to $1000 to 2000 per year depending on their tax bracket. It goes without saying that employers should always consult their tax advisor.

Commuter Benefits Keep Your Business Competitive

“If you want your workforce to get to work on time and if your company wants to meet environmental goals,” says Judd. “You have to offer commuter benefits.” Commuter benefits work well for both large and small companies, and for the latter can offer a completive edge even when they can’t offer other benefits. “It says ‘we’re trying’ to employees, and offers a tangible benefit even when they can’t offer benefits like eye care or gym memberships,” says Judd. From an employee’s perspective, it’s also great to not have to drive back and forth to work every day and allows for productivity while commuting.

Commuting Has Changed — Expect Changes in Benefits

Over the years commuting has evolved significantly, from technological changes to extended accessibility. COVID-19 has even further accelerated change, putting things like hygiene, automatic fare collection, and concepts like First Mile/Last Mile front and center. Modes of transportation are also expanding and things like scooters, e-bikes, carpooling, and shuttles may soon be considered transit. “There are currently some bills in congress moving towards this ‘new mobility world’ with representatives like Earl Blumenauer of Oregon advocating for bicycle benefits and alternative mobility,” says Judd. Also, as commuter benefits are tied to inflation, you may see an adjustment to the current deduction rate in the future.

Photo by Jeremy Bishop on Unsplash

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