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Affordable Transit Act now Law

Posted on 02/27/2015

New York City Mayor de Blasio Signs Affordable Transit Act into Law

On October 20, 2014, New York City Mayor Bill de Blasio signed Local Law 53, the Affordable Transit Act. Under this new law, New York City businesses with 20 or more full-time employees will be required to offer a federal commuter tax fringe benefit to employees. Covered employers will need to establish a program enabling employees to set aside pre-tax income, up to the IRS limit of $130 per month for transit, to pay for their public transportation costs. This means that as of your benefits renewal that occurs on or after January 1st, 2016, you must offer the transit benefit if your organization is located within the five boroughs of New York City.

TRANSIT BENEFITS: GOOD NEWS FOR NYC COMMUTERS

 
New Yorkers rely on public transit: Each weekday, New Yorkers take more than 7.8 million rides on the bus and subway.1 And when one of New York’s train and bus riders pays out-of-pocket at a MTA booth or vending machine, they’ve likely had to pay income tax on the money they use. For instance, an average New Yorker buying a $112 monthly transit pass has already spent around $36 in federal income tax on that money before it even made it into their paycheck

Fortunately, there is a federal program that lets commuters hold on to that money. The federal transit benefit program (IRC Sec. 132 (f)) lets transit users save hundreds of dollars per year by paying for transit fare through their employers on a pre-tax basis, the same way people pay premiums on employer-provided health insurance or for certain retirement contributions. An employee at a business offering transit benefits can set aside up to $130 of their paycheck toward their transit costs each month, reducing their gross taxable income by the amount they set aside.

This means that a New Yorker making the median wage and buying $112 monthly transit passes will save $443 per year.2 A New Yorker spending more per month—for instance, commuting by express bus—can sign up for the maximum benefit amount of $130 per month and save $514 per year.3 These numbers are averages based on New York City’s median wage; each transit rider’s own savings depend on his or her earnings, tax filings, and transit usage. Not surprisingly, the program is popular: it is estimated that around 750,000 transit riders who both live and work in New York currently take advantage of transit benefits.4 

1 “Subway and Bus Ridership,” New York Metropolitan Transportation Authority. http://web.mta.info/nyct/facts/ridership/index.htm 
2 Savings estimates derived from the TransitChek benefits calculator. http://pages.transitchek.com/calculatesavings/english/index230cap.html 
3 Such results are typical, but actual savings will vary and depends on the cost of transit options, the specifics of one’s tax status, and other such factors
4 All aggregate figures in this report reflect the population of individuals who are both employed and reside in New York City, or relevant subsets thereof. Estimates including additional non-residents of New York City who use or would be eligible for transit benefits (not included in this analysis) would be significantly larger.

GOOD NEWS FOR NYC EMPLOYERS TOO!!
 
The program is popular with employers, too. Not only does it allow them to offer employees a money-saving benefit for free, but it saves employers hundreds of dollars a year too by reducing their payroll tax burden. For every dollar an employee spends on pre-tax transit benefits, an employer can save up to 7.65¢ in avoided federal payroll tax. This means that an employee making the median New York City salary and regularly buying monthly public transit passes using transit benefits will save their employer about $103 every year. 

For those employers who already offer this benefit, you are ahead of the game and in compliance ahead of the January 1st, 2016 mandate.

For those employers that will need to add this offering to their benefit suite, the good news is that there is time.  We have vendor partners that get this set up for you swiftly and efficiently during your next benefits renewal.  

If you have additional questions about the Affordable Transit Act, do not hesitate to call Florence DiLeo at 631-434-8200 extension 25 or Laura Vassino at extension 24.

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