Certain New York City Employers must Provide Pre-Tax Commuter Benefits

Print

On January 1, 2016, New York City’s Affordable Transit Act will go into effect.  The Act requires employers with 20 or more full-time employees to offer its employees the opportunity to use pre-tax wages toward certain commuting expenses.  The Act defines a full-time employee as one who works on average 30 hours or more per week. 

Pursuant to the Act, employers must permit their employees to designate up to $130 per month for mass transit passes (for example, train, subway or bus fares), or $20 per month to cover expenses related bicycling to work (such as purchasing, repairing or storing a bicycle) if the employee regularly commutes to work on a bicycle.  The Affordable Transit Act is modeled after the  Internal Revenue Services’ optional transportation benefit law but, unlike its federal counterpart, the Act does not require employers to provide parking benefits to their employees. 

The Act is anticipated to save employers money on their payroll-related taxes, while employees will save on their income taxes.  According to New York Mayor de Blasio’s office, the legislation is expected to save employees $400 per year and save employers $100 per year per employee in tax liability.

Employers who fail to comply with the Affordable Transit Act will face fines between $100 and $250 for the first violation and $250 for subsequent violations.  The Act does, however, provide employers with the opportunity to avoid paying a first-violation fine by curing the violation within 90 days.  If the violation is not cured, then the employer will be fined an additional $250 for every  30 days of noncompliance.  Although the Act goes into effect on January 1, 2016, employers will not be subject to penalties for violations occurring before July 1, 2016. 

The Affordable Transit Act does not apply to four categories of employers, which include: (1) the federal government, State of New York and New York City government entities; (2) employers with a collective bargaining agreement covering their employees; (3) employers who are not required to pay federal, state and city payroll taxes; or (4) if the employer can demonstrate financial hardship. 

New York City employers who do not yet offer commuter tax benefits to their employees should act quickly to conform their benefit plans to the Affordable Transit Act and to avoid any unnecessary fines.  For assistance with implementation and compliance with the Act, please contact Connell Foley’s Labor and Employment law attorneys.