Retirement Plan Blog

09 | 8 | 2009 Posted By Jerry Kalish

That's The Police, circa 1983, pictured above. 1983 as the year when Sting was the King of Pain. That was the title, of course, of the hit song he wrote, one of the tracks on the album Synchronicity – the last and greatest Police album.

The story goes that King of Pain was a very personal song for Sting. He had recently separated from his first wife and was not getting along with the other two members of the band. Sting wrote the song in Jamaica at the house where Ian Fleming wrote the James Bond books. Fleming called his house in Oracabessa, Goldeneye (available for your next vacation, and not exactly where you would expect to see "a little black spot on the sun today").

Now some 26 years later, employees commuting back to work after the Labor Day weekend are the new Kings and Queens of Pain. That's the findings of the second annual IBM Commuter Pain survey released last week. The survey indicates that the recession is taking its toll on urban motorists, who have become significantly more sensitive to gas prices and are looking for ways to spend more time with family and friends.

IBM has compiled the results of the survey into a Commuter Plan Index that ranks the emotional and economic toll of commuting in each city on a scale of one to 10, with 10 being the most onerous. Here's how the cities stack up ranking those with the highest commuter pain index first:

1. Los Angeles
2. Washington, D.C.
3. Miami
4. Chicago
5. Boston
6. New York
7. Atlanta
8. San Francisco
9. Dallas-Ft. Worth
10. Minneapolis-St. Paul

To deal with the problem, the IBM survey concludes that:

Commuters too, will have to do their part. Continued use of public transportation, carpooling, vanpooling, and alternate forms of transportation like walking or biking will help ease the burden on our roads.

Employers can, in fact, help employees do their part by offering a Commuter Transit Benefit, the link to which will take you to the blog posts I've written on this topic. It’s an increasingly popular 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).

In 2009, employees may reduce their salary or receive up to $230 per month for transit passes, transportation in a commuter highway vehicle, or parking expenses.

Employees can also receive up to $20 per month tax-free for the reasonable expenses they incur during a calendar year for the purchase of a bicycle, for bicycle improvements, and for repair and storage if the bicycle is regularly used for travel between the employee’s residence and place of employment.

A Commuter Transit Benefit may not take all the pain away from commuting, but it's better than simply taking two aspirins. 

Nuff said. Now let's roll the video and scroll the lyrics. 

The Police lyrics

02 | 25 | 2009 Posted By Jerry Kalish

Over at Slate’s BizBox blog, a special promotion by Open from American Express, I posted an article about the impact of the stimulus package affects employee benefits, specifically COBRA and Commuter Transit Benefits under Section 132 of the Internal Revenue Code. The stimulus package provides extended and subsidized COBRA benefits and increases the amount of transit benefits that can be provided on a pre-tax basis. Check out the details in COBRA and Transportation: How The Stimulus Affects Employee Benefits.

01 | 13 | 2009 Posted By Jerry Kalish

Over the past few months, I've blogged about how employers can sponsor a commuter transit benefit to help employees cope with higher commuting costs to pay for those expenses on a pre-tax basis under Section 132 of the Internal Revenue Code. The employer can also receive tax benefits since generally there are no payroll-related taxes involved.

But there may also be an important non-tax reason to consider - stress in the workplace. Dwight A. Hennessy, Department of Psychology, Buffalo State College writes about that in his article, The Impact of Commuter Stress  on Workplace Aggression, that appeared in the September 5, 2008 on-line issue of the Journal of Applied Social Psychology, Here is the Abstract

Immediately following their regular commute to work, participants completed questionnaires regarding state driver stress and anger during that commute. Then, immediately following completion of that work day, they completed a state version of the Workplace Aggression Scale. As state driver stress increased, the frequency of both expressed hostility and obstructionism increased (independently) during that work day, butS only among male employees. In contrast, overt aggression during that work day was greatest among males who were higher in physical aggressiveness as a general trait characteristic. The present study highlights the interactive nature of traffic and workplace environments, in that negative experiences in the traffic environment may spill over for some individuals to influence nondriving events.

Hat Tip to Dr. Christian Jarrett, Editor, of the British Psychological Society's Research Digest 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.