Commuter Benefits Overview
Commuter Benefits enable employees to pay for certain workplace mass transit and parking expenses on a tax-free basis through payroll deductions up to the limits set by the IRS. Employees set aside funds on a tax-free basis to pay for eligible workplace mass transit expenses, such as the price of tickets, vouchers, and passes to ride a subway, train, city bus, or vanpool. Commuter Benefits are not tied to a benefit year, so the funds remain in the employee’s account until exhausted. Election changes are not limited by a plan year and can be updated or stopped as employees' needs change.
Plan design options
There are two primary types of commuter benefits:
Mass Transit Account
Expenses for a bus, train, subway, or vanpool if the transportation is in connection with travel between an employee’s home and employer, up to the monthly IRS limit.
Parking Account
Expenses for eligible workspace parking expenses, parking costs at or near their primary work location, or parking costs at the place to access transportation to work, such as a train station or vanpool stop, up to the monthly IRS limit.
How it works
Employees decide how and where to spend their commuting dollars. After registering the account, an employee would select and order bus or transit passes, transit authority smart cards, tickets, commuter checks, or reloadable commuter check cards to pay for their qualified commuting expenses.
For ongoing, commuter-related expenses, employees can set up a recurring order which automatically generates their transit order or pays their contracted parking vendor. If the employee’s commuting needs change, they can adjust or discontinue their order.
Employees can also pay their contracted parking vendor directly. If they use multiple parking lots or only park occasionally, they can still use the transportation services benefit. They would simply submit a claim for reimbursement, along with their parking receipts or other documentation.
Money deducted from an employee’s paycheck before taxes will be used to pay for their transit or parking order. If an employee’s order exceeds the monthly limits, the additional amount can be deducted from their paycheck after taxes.
In the following example, to show tax savings from the Commuter Benefits, the employee drives to the commuter parking lot at a local train station and takes a train into the city for work. On a semi-monthly basis, the employee deducts $100 for transit expenses and $100 for parking expenses. This money is deducted from his or her paycheck before taxes and reduces his or her taxable income by $4,800 per year, resulting in an estimated tax savings of $1,807.20 annually for an individual in a 25% federal tax bracket and 5% state tax bracket.
| ONE | TWO |
|---|---|
| Federal income tax – 25% | $50.00 |
| State income tax – 5% | $10.00 |
| FICA – 7.65% | $15.30 |
| Tax Savings every paycheck | $75.30 |
| Tax Savings annually (24 pay periods) | $1,807.20 |
Document services
Plan Documentation
HSA Bank can facilitate the generation and maintenance of the written Plan Document and Summary Plan Description for Commuter plans. These documents are a crucial part of any benefit program offered by employer groups as they communicate the plan benefits and how each plan operates. All documents are stored electronically for later reference and include a date and time stamp of the original or any subsequent revisions.
Wellness Incentive Accounts
Create a culture of health with consumer-directed health plans. When employers engage their employees in their health, they have an opportunity to not only lower healthcare costs, but play a role in healthier and more productive employees.
One of the easiest wellness incentives is to offer an additional Health Savings Account (HSA) or Health Reimbursement Arrangement (HRA) contribution to employees who complete a health and wellness initiative. When wellness contributions are made, we'll make sure to encourage employees along the way with wellness-specific messages, including descriptions on their account statements.
At HSA Bank, we can integrate with a variety of wellness activity tools and vendors, making it easy for employers to work with us on their wellness initiatives.