Commuter Benefit Overview

Commuter Benefits 

Commuter Benefits allow employees to pay for qualified work-related transportation and parking expenses with pre-tax dollars. 

Commuter benefits can be used for any one or a combination of the following:

• Use of a commuter highway vehicle* between the employee's home and work place
• A transit pass
• Qualified parking 
• Approved commuter rides-sharing through services like Lyft and Uber 

*a commuter highway vehicle has a seating capacity of 6 adults plus a driver. This can be a private vehicle but must be used 80% of the time for work commuting purposes and on average be at minimum half capacity.

Eligibility

For companies that choose to offer commuter benefits through Justworks, all full time employees and part-time employees, including paid interns, as well as paid owners are eligible to take advantage of pre-tax commuter benefits. However, unpaid owners, >2% S-Corp shareholders, and contractors are not eligible to take advantage of the pre-tax benefit. 

Contribution limits

The IRS limits the pre-tax amount employees are able to contribute and use for commuter benefits on a monthly basis.

Employees can take advantage of both transit and parking benefits, each up to the pre-tax limit. Anything above the monthly limit will not be on a post-tax basis.

For example, an employee can contribute and use up to $300 for transit and $300 for parking for a total of $600. However, if an employee wants to use $350 for transit only $300 would be pre-tax.

Are companies required to offer commuter benefits to employees?

Certain states and municipalities require that some employers must offer commuter benefits. We are going to break down those requirements and who they apply to.

NYC: NYC Transit Ordinance requires that employers, located in any of the five boroughs with 20 or more full time employees, offer commuter benefits for transit. Parking benefits are not required for NYC companies. To qualify, employees only have to work in NYC, they do not have to live in the city. For more specific information about NYC Commuter Benefits please visit their website here.

New Jersey: The New Jersey Commuter Benefit Ordinance requires all employers who have 20 or more employees, not covered by a collective bargaining agreement, offer commuter benefits. Tax exempt employers are excluded from this act. Employees do not have to live in New Jersey to be eligible for commuter benefits. For more specific information about New Jersey Commuter Benefits please visit their website here. 

Philadelphia: Philadelphia Commuter Ordinance requires that employers who have 50 or more employees(averaging 30 or more hours per week), offer commuter benefits for transit. To qualify, employees only have to work in Philadelphia, they do not have to reside in the city. For more specific information about Philadelphia Commuter Benefits please visit their website here.

Philadelphia Commuter Ordinance will go into effect December 31, 2022. 

Washington DC: Sustainable DC Omnibus Amendment Act requires employers with 20 or more employees to offer commuter benefits. For more information about options under the act please visit D.C’s page here.

The DC Parking Cash Out Law requires companies with 20 or more employees that rent or have parking space available and lease or allow their employees to use the spaces to report the number of employees utilizing the parking benefit and complete one of the following:

• provide a Clean Air Fringe Benefit* equal to or greater than the value of the parking benefit,
• implement a transportation demand management plan that meets the District Department of Transportation(DDOT) standards, or
• pay a Clean Air Compliance fee to DDOT for each employee offered parking benefits every month.

*Should you decide to provide a Clean Air Fringe Benefit, this can be recorded on the Justworks platform using the Fringe Benefit Tool in the Payments Center.

For more information please see the DC Parking Cash Out Law’s Employer Guide and FAQs.

The DC Parking Cash Out Law will go into effect January 15, 2023.

Seattle: Seattle Commuter Benefit Ordinance requires employers who have 20 or more employees to offer commuter benefits. Tax exempt employers are excluded. Employees do not have to live in Seattle to be eligible for commuter benefits. For more information on the specifics of Seattle's Commuter Benefits please visit their website here.

Los Angeles, CA: Los Angeles County Metropolitan Transportation Authority requires that all employers with a total of 50 to 249 employees (full-time and part-time) at a single worksite, must offer a commuter tax benefit to every full-time employee at that worksite. For more information about this ordinance please see here. 

Bay Area, CA: Bay Area Commuter Benefits Program requires that all employers with 50 or more employees (averaging 10 or more hours per week) reporting to work within the Bay Area , must offer commuter benefits. This Ordinance overlaps with the San Francisco, Richmond, and Berkeley city ordinances to ensure companies with workers spread across various cities are also obligated to provide commuter benefits. For more specifics about the Bay Area program please visit their website here. For information on city ordinances, please see below. 

San Francisco: San Francisco Commuter Benefits Ordinance requires all employers with 20 or more employees (averaging 10 or more hours per week) nationwide offer commuter benefits. For more specifics about the San Francisco Commuter Benefits Ordinance please visit their website here.

Richmond, CA: Richmond Commuter Benefits Ordinance requires all registered businesses in Richmond with 10 or more employees (averaging 10 or more hours per week) offer commuter benefits. For more information on the specifics of the Richmond Commuter Benefits Ordinance please visit their website here.

Berkeley, CA: Berkeley Municipal Code 9.88 requires that all employers with 10 or more employees (averaging 10 or more hours per week) offer commuter benefits. For more information on the specifics of Berkeley’s Municipal Code please visit their website here.

While commuter benefits may not be required for your company they are a great retention and recruiting tool for employees. All employees have to commute to work and offering a commuter benefit program helps employees save tax dollars to cover those costs. 

Want to offer your employees commuter benefits? Login to Justworks and navigate to the Benefits section under HR on the left hand side. From there navigate to the add benefits tab and select commuter.