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Summary:

On March 1, 2019, New Jersey passed S1567 (“law”), which requires certain New Jersey employers to offer their employees pre-tax commuter benefits. New Jersey employers with 20 or more employees will be required to offer employees the opportunity to elect pre-tax deductions for commuter benefits up to the IRS limit, which is $260 a month for transit and vanpool and $260 a month for parking in 2019.

Which employers are subject to the law?

New Jersey employers with 20 or more employees are subject to the law. The law defines “employers” as those subject to New Jersey’s unemployment compensation law, which includes all employers that employed one or more individuals that were paid remuneration of at least $1,000 in a calendar year.

When determining employee count, employers should could all employees who perform remunerated services localized in New Jersey, regardless of their residences, including full time, part time, and casual workers receiving remuneration. Employers should not include employees covered by a collective bargaining agreement when determining employee count.

Which employees must be offered a pre-tax commuter benefit?

If an employer is subject to the law, the employer must offer the commuter benefit to all employees hired or employed by the employer and who reports to the employer’s work location. The employer does not need to offer the commuter benefit to employees covered by a collective bargaining agreement.

What is the penalty for non-compliance?

Employers who are found to be in violation of the law of shall be liable for a civil penalty of between $100 and $250 for the first violation. Employers have a 90-day grace period to comply before the civil penalty is imposed. If the employer is not compliant within the 90-day grace period, the employer will be assessed an additional $250 for each 30-day period of noncompliance.

When does the law take effect?

The law took effect immediately but is to remain “inoperative” for one year or upon the effective date of the rules and regulations adopted by the New Jersey Department of Labor and Workforce (NJ DOL), whichever occurs first. The NJ DOL is scheduled to adopt rules and regulations concerning the administration and enforcement of the law.

What should employers do to comply with the law?

Employers have time to prepare for compliance, since the law is currently inoperative and there is no specific guidance on how to comply until the NJ DOJ releases regulations. In the meantime, employers can prepare by first determining whether they are subject to the law. If they are subject to the law, employers can work with their payroll team to set up a system that allows employees to elect pre-tax commuter benefits up to the IRS maximum.

Additional Resources:

New Jersey Commuter Benefits Law S1567

Press Release: Governor Murphy Signs Legislation to Provide Tax Benefit for New Jersey Commuters

 

The information and materials on this blog are provided for informational purposes only and are not intended to constitute legal or tax advice. Information provided in this blog may not reflect the most current legal developments and may vary by jurisdiction. The content on this blog is for general informational purposes only and does not apply to any particular facts or circumstances. The use of this blog does not in any way establish an attorney-client relationship, nor should any such relationship be implied, and the contents do not constitute legal or tax advice. If you require legal or tax advice, please consult with a licensed attorney or tax professional in your jurisdiction. The contributing authors expressly disclaim all liability to any persons or entities with respect to any action or inaction based on the contents of this blog.

Emerald Law– Emerald is a Client Compliance Consultant for Sequoia, where she works with our clients to optimize and streamline benefits compliance. In her free time, Emerald enjoys stand-up comedy, live music and writing non-fiction. 

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