The City of Philadelphia’s Employee Commuter Transit Benefit Program (Program), which requires certain employers to provide a mass transit or bicycle commuter benefit program, will go into effect on December 31, 2022. The City is expected to release additional compliance information and instructions materials on the Program. What we know so far about the Program is outlined below.
Covered Employers: Employers with 50 or more Covered Employees are subject to the Program. Covered Employees are those who work an average of at least 30 hours per week, for compensation, in Philadelphia for the same employer within the previous 12 months.
Under this definition, employers with less than 50 employees working 30 hours or more per week in Philadelphia are not subject to Program.
Commuter Benefit Requirements: Covered Employers must make available to all Covered Employees at least 1 of the following employee commuter transit benefits:
- The ability for Covered Employees to elect a pre-tax, payroll deduction for mass transit expenses, expenses related to transportation on a “commuter highway vehicle” (as defined under Internal Revenue Code (IRC) section 26 U.S.C. § 132(f)(5)(B)), or “qualified bicycle expenses” (as defined under the IRS code 26 U.S.C. § 132(f)(1)(D) and (f)(5)(F)), in amounts equal to or greater than the IRS maximum non-taxable amounts;
- An employer-paid fare instrument (e.g., pass, token, fare card, or similar item entitling a person to transportation on public transit) equal to, or greater than, the IRS maximum non-taxable amounts;
- Any combination of (1) and (2) above.
Under the IRC, a “commuter highway vehicle” is one that primarily transports groups of employees between their residence and place of employment and “qualified bicycle expenses” are reasonable expenses for the purchase of a bicycle, bicycle improvements, repair, and storage for a bike that is regularly used for travel between the employee’s residence and place of employment. It is important to note that for 2018 through 2025, individuals are not permitted to exclude qualified bicycle expenses from their federal income (i.e., any reimbursement for qualified bicycle expenses are taxable as income for employees), but employers are permitted to deduct these expenses as a business expense.
The IRS maximum non-taxable amounts for 2022 for a transit pass or “commuter highway vehicle” is $280 per month. This maximum is adjusted annually and is projected to increase to $300 in 2023 (though the final figures have not been released at this time).
Penalties: Employees can report violations of the Program to the City, which will investigate and attempt to mediate compliance. Employers who fail to comply after being warned can face potential fines and penalties.
Employer Action: Employers should determine whether they are a “Covered Employer” under the Program, and if so, should prepare to offer a compliant commuter benefits program to Covered Employees in anticipation of the December 31, 2022 compliance date.
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