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.