Retirement Plan Blog

11 | 11 | 2008 Posted By Jerry Kalish

We're big on commuter transit benefits here. Not only for cilents, but for our own employees who take public transportation. It's good for employees, it's good for employers, and it's good for the environment.

It's something I've blogged about before, What's Old is New Again: Commuter Benefits Under Section 132 and The Next Generation of Tax Favored Commuter Benefits: Bicycle Commuting.

Under Section 132 of the Internal Revenue Code, employers can provide a program that allows employees to pay for commuter expenses, i.e., public transportation, parking, and now bicycle commuting on a tax-favored basis. Employers get a tax break since Social Security taxes are not imposed on the benefit - not available with 401(k) plans.

It's a benefit that continues to grow in popularity because of the economy and global warming. TransitCenter, a company specializing in commuter benefit programs, just released their 2008 Commuter Impact Survey that provides a number of key insights and implications regarding the impact of commuting on employers, employees, and strategies used to address these impacts. Here are the implications they found as a result of their survey:

The Survey indicates that employers are profoundly concerned about the impact that high fuel and commuting costs are having on their employees. Importantly, most employers see a need to help find viable solutions to soften this impact. Yet, while employers see raising salaries as a means of providing relief, they also cite concerns that they may not have the resources to do so in today’s economic climate.

Survey findings also show that commuter benefit programs, including flextime, telecommuting and tax-free commuter benefits, continue to be a viable solution for employers to help employees cope with high commuting expenses. In particular offering a tax-free commuter benefits program is viewed as having three key impacts: a highly relevant and cost-effective enhancement to a company’s overall benefits package; an effective way to attract and retain employees; and an easy solution to help reduce a company’s carbon footprint.

Factors that may prompt more companies to offer commuter benefits — and more employees to use them — include tax credits and increases to the IRS cap on monthly pretax salary deductions for commuter benefits.

 Here is a link to the full survey.

Hat tip to Kris Dunn and his HR Capitalist blog.

11 | 1 | 2008 Posted By Jerry Kalish

Just this summer I wrote What's old is new again: commuter benefits under Section 132. The post was about employers rediscovering (or discovering in some cases) that they could assist employees paying for commuter transit and parking expenses on a pre-tax basis - and the tax savings that employers themselves could realize. Interest sparked, of course, by higher gas prices.

Now here comes the next generation of tax-favored commuter benefits. Buried in the Emergency Economic Stabilization Act of 2008, a/k/a the "Bailout Bill", is a provision that allows employers to provide employees with a new tax-favored bicycle commuting reimbursement benefit.

Section 132(f) of the Internal Revenue Code was amended to allow employees starting January 1, 2009 to receive up to $20 per month tax-free for the reasonable expenses they incur during a calendar year for:

• The purchase of a bicycle and for bicycle improvements
• Repair and storage if the bicycle is regularly used for travel between the employee’s residence and place of employment

The bicycle commuter benefit is not available if the employee receives other Section 132 commuter benefits, i.e., transit or parking reimbursement.

Picture credit: Bike To Work, The Best Part of Your Day poster by daisy art studio of Seattle, Washington.

06 | 28 | 2008 Posted By Jerry Kalish

The results of a recent survey by Putnam Investments come as no surprise to those of us that are involved with 401(k) plans on a daily basis.

Putnam found that because of the current downturn in the economy employees are putting away less money in their 401(k) accounts: 21% of 401(k) participants are now contributing at a lower rate and 4% have stopped altogether.

But there is a way employers can help employees put more dollars in their paychecks at no additional expense to them. In fact, tax savings are available to both employers and employees.

So what is it, and how does it work? It’s an oft forgotten program that allows employers to offer employees the opportunity pay for certain transportation expenses on a pre-tax basis under Internal Revenue Code Section 132 and the Transportation Equity Act for the 21st Century (TEA-21).

Pre-tax means before income taxes and FICA. Pre-tax benefits are valuable to employees because they effectively increase take-home pay. These benefits are also valuable to employers because the employer avoids paying its share of FICA.

Qualified transportation expenses generally include payments for the use of mass transportation, e.g., train, subway, bus fares), and for parking. Amounts are indexed for inflation. For 2008 the maximum monthly pre-tax contribution for mass transit is $115.00, and $220.00 for parking.

And there’s one more goodie. While Section 132 benefits are similar to the pre-tax flexible spending accounts available for medical expenses and dependent care under Section 125, there’s one important difference. The transportation benefit does not include a "use it or lose it penalty," as required with medical/dependent care flexible spending accounts.