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Beginning November 14, 2019, covered employers who fail to offer the required transit benefits under the D.C. Commuter Benefits Law to their covered employees will be subject to a fine. The fine is imposed on a per covered employee, per month basis, and increases with each subsequent offense. For more on the requirements under the law, including which employers and employees are covered, see the discussion below.

 

Compliance Snapshot:

  • Covered employers (those with 20 or more employees working in D.C.), are required to provide at least one of three transit benefit options to their D.C. employees within 90 days of hire.
  • Beginning November 14, 2019, covered employers who fail to provide their covered employees commuter benefits may be fined $100 per covered employee for the first offense, $200 for the second offense, $400 for the third offense, and $800 for the fourth and any subsequent offenses.

 

Background:

The D.C. Commuter Benefits Law (“law”) came into effect on January 1, 2016 and enforcement began on April 1, 2016. Final regulations on the law were released on August 2, 2019.

 

Which employers are subject to the Commuter Benefits Law?

Employers (including non-profits) with 20 or more employees in Washington D.C. are subject to the Commuter Benefits Law.

 

To determine employee count, employers must use the greater of:

  • the number of full-time and part-time employees as of December 31st of the prior year; or
  • the average number of employees during the previous calendar year.

 

Which employees are covered under the Commuter Benefits Law?

Covered employees include full-time and part-time employees:

  • who perform 50% or more of their work in D.C.; or
  • whose employment is based in D.C. and a substantial amount of their work is performed in D.C. with less than 50% of their work performed in any other state.

 

Covered employees must be offered the benefit within 90 days of employment.

 

What benefit must employers offer to covered employees under the law?

Covered employers must offer at least 1 of 3 options to covered employers:

  1. Employee-Paid, Pre-tax option;
  2. Employer-Paid, Direct Subsidy; and/or
  3. Employer-Provided Transportation.

Employers can provide any combination of the above three benefits, but the total combined benefit cannot exceed the maximum benefit under Internal Revenue Code (IRC) Section 132(f), which was $265 per month in 2019. The IRS maximum under IRC Section 132(f) is adjusted annually for inflation.

The different benefit options are discussed below.

 

Employee-Paid, Pre-tax option: Employers allow employees to elect pre-tax deductions, up to the IRS maximum, to pay for a transit pass or vanpool expenses (i.e. transportation on a commuter highway vehicle). Starting in 2026, employers can also allow employees to elect deductions for bicycling benefits.

 

Employers can either administer the pre-tax commuter benefit in-house or hire a third-party vendor.

  • Employers who decide to administer the benefit in-house can set up a free SmartBenefits account provided through the Washington Metropolitan Area Transit Authority (WMATA).
  • Employers who decide to hire a vendor must take payroll deductions and coordinate benefits with the vendor.

Employer-Paid, Direct Subsidy: Employers supply, at the employee’s election, a transit pass or reimbursement of vanpool expenses. This benefit would be tax-free for the employee but taxable for the employer. Employers can also provide bicycling costs (in an amount at least equal to a transit pass) but the benefit will be taxable for the employer and employee.

 

Employer-Provided Transportation: Employer-provided shuttle, vanpool, or bus operated by the employer, at no cost to employees. For instance, employers can provide transportation from Metro stations, parking lots, or major hubs to the employer’s office.

 

The D.C. Department of Transportation provides employers with complimentary support on starting or enhancing a commuter benefits program through goDCgo.

 

Are there any notice requirements under the law?

Yes, employers must notify covered employees of the availability of the commuter program and how to apply for the transit benefit. Employers must also provide a point of contact for covered employees to obtain more information about the transit benefit.

Employers can notify covered employees using any appropriate means, including email, internal documents (such as memos, newsletters, or bulletins), or electronic bulletin boards (such as an employer’s intranet system).

 

Are there any recordkeeping requirements under the law?

Employers must keep records showing compliance with the law for at least 3 years and must make records available upon request of the D.C. Department of Employment Services.

 

What are the penalties for non-compliance?

Covered employers who fail to offer at least one transportation benefit to covered employees are subject to the following fines:

 

Violation Penalties (per covered employee, per month)
First offense $100
Second offense $200
Third offense $400
Subsequent offenses $800

 

The fines are assessed on a per covered employee basis and are reassessed for each subsequent calendar month the employer is in non-compliance.

In addition, covered employees can file complaints of violations with the D.C. Department of Employment Services.

 

Employer Action Items:

Employers covered under the D.C. Commuter Benefits Law must:

  1. Offer at least 1 of 3 commuter benefits to their D.C. employees within 90 days of hire;
  2. Notify covered employees of the commuter benefit, how to apply, and who to contact for more information; and
  3. Keep records showing compliance for at least 3 years.

 

Additional Resources:

 

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.