Transit Benefits Programs…

Workplaces need to vigorously pursue green initiatives. Amid this era of progressive greenery, cities are seeing many changes from public transit and green roofs to carbon taxes and user fees. As we have blogged about before, public transit is perhaps the most optimal area for increasing the efficiency and greenery of a city. What we need to see however, is the active involvement of workplaces in the creation of public transit incentives. A vast percentage of employees in any city find themselves commuting to work everyday. Workplaces need to be offering their employees ample reason and incentives to take public transit.

In Chicago, there is a program called the Regional Transit Authorities Transit Benefit Fare Program. This program is an employee benefit program administered by employers. The intricacies of the program are not overly complex- it allows employees to pay for their public transit rides using “pre-tax dollars” up to $230 per month ($2,760/year). This is targeted for transit and/or vanpool commuting expenses as tax-free benefits. For the different options see here.

This program benefits both the employer and the employee. For employers, it provides tax savings up to 10% of what employees spend on transit. It helps increase workplace productivity and serves as a great recruiting tool. For the progressive and environmentally friendly employees, it provides tax savings up to 40% of their transit spend, reduces employee commuting costs and helps green the ethos of the workplace.

Certain cities like San Francisco have “tax-free transit benefit accounts”. Employees put aside up to $115 per month or $1380 per year in a tax-free transit benefit account. “This can save between $300 and $500 annually per person and companies can save over $100 per employee per year in payroll taxes by directly contributing to the account.” This of course depends on the tax bracket.

In essence, organizations that undertake this generally have more workplace satisfaction and less absenteeism. Long automobile and transit commutes can be tiring and expensive. If employees have the option of avoiding highway traffic and receiving tax incentives to take public transit, then there is less reluctance to miss work.

There are different ways of administering a transit benefits program for a workplace. The one I would support for an organization would be the pre-tax income option. For this option, employers allow their employees to use their pre-tax income to pay for transit or vanpooling. This does not mean that employers pay for the benefit but instead allow employees to take advantage of the tax savings by using their gross income to pay for qualified commuting expenses.

This could save employees up to $1066 in annual taxes by paying for transit with pre-tax income. And, “Employers see a reduction in their payroll costs on the amount set aside since they do not pay taxes on this amount.” This option would be appealing for numerous workplaces.

Key message: Transit benefit programs offer multiplicity of choice. They are cost effective, environmentally smart and excellent for workplaces of the 21st century. For more info on this topic, see Chicago's regional transit authority: