What are Commuter Benefits?
Commuter benefits are fringe benefits that employers can offer to help employees save money on their daily commute to work.
These benefits can be used to offset a diverse range of transportation costs including parking, train tickets, and bus fares.
Commuter benefits can take different shapes: the employer can pay outright for employee transportation or can offer a way for employees to pay for their transportation tax-efficiently using pre-tax income.
The Different Types of Commuter Benefit Programs
When setting up a commuter benefits program, an employer has three choices. The benefits can be either employee-paid, employer-subsidized, or employer-managed.
Employee-paid benefits are the most popular option because this method costs companies very little to set up and administer.
In this program, the employee uses pre-tax income to pay for qualified commuting expenses. Using pre-tax income allows the employee to save on income taxes and allows the employer to save on payroll taxes.
Employer-subsidized benefits involve a company giving employees extra money each month that is specifically earmarked for spending on daily commutes.
The employer can choose to pay the full amount of employee commuting expenses or to partially subsidize them. With this method, the employer can deduct the benefits paid from payroll taxes.
Employer-managed benefits involve a company directly providing transportation to employees through some kind of shuttle service.
This is the most onerous way to provide commuter benefits and is a viable option only for large companies. The money the employer pays for this transportation is tax-deductible.
What Commuter Benefits Can Be Used For
There is a good amount of flexibility for companies that sponsor employee-paid or employer-subsidized benefits programs.
Employees can choose to use their benefits on a diverse set of options including public transportation, car parking, and carpooling. However, not all forms of commuting are sanctioned under one of these benefits programs.
Commuter benefits are a great way to save money. It’s worth the effort to see what your company offers!