On March 1, 2020 the New Jersey Transit Benefits Law (“Law”) became effective, requiring New Jersey employers to offer their employees pre-tax transportation benefits (“transit benefits”). The Law requires an employer to set up a benefit program that allows employees to set aside pre-tax salary benefits into a separate account to cover qualified mass transit and parking expenses associated with the commute to work. Contributions to a commuter account are deducted from employee paychecks on a pre-tax basis, reducing the taxable income of employees.
Employers with 20 or more employees are required to offer transit benefits to their employees. There are two different deadlines for compliance with the Law for those employers who have both employees who are subject to a collective negotiations agreement (“represented employees”) and those that are not subject to a collective negotiations agreement (“non-represented employees”). Employers with non-represented employees were required to provide transit benefits as of March 1, 2020. Employers with represented employees must offer transit benefits at the expiration of their collective bargaining agreement.
Benefits Under the New Jersey Transit Benefits Law
Under the Law, employers must provide transit benefits consistent with the “provision and limits” of Section 132(f)(1) of the Internal Revenue Code for the following: (i) commuter highway vehicle benefits (ii) any transit pass and (iii) qualified parking. The definitions of the above three terms, contained with Section 132(f) of the Code, are as follows:
- A commuter highway vehicle is “any highway vehicle” which has the seating capacity of at least six (6) adult passengers, and at least 80% of the mileage use of the vehicle can reasonably be expected to be used to transport employees to work, and on trips where the vehicle is at least half-capacity (not including the driver, transporting at least three adult passengers). Commuter highway vehicles include vanpools and rideshares such as Uber Pool and Lyft Shared.
- A transit pass means any pass, token, fare card, voucher, or similar item used on mass transit facilities or provided by any person in the business of transporting people for compensation who transports them in a commuter highway vehicle, as defined above. Mass transit facilities include: train, bus, subway, light rail, and ferry.
- Qualified parking means parking provided to an employee on or near the employer’s property or on or near the location from which the employee commutes to work by means of a commuter highway vehicle or use of a transit pass. Out-of-pocket expenses such as parking fees for meters, garages and lots qualify, as long as they are incurred when an employee is commuting by means of a commuter highway vehicle or use of a transit pass. Parking at or near an employee’s home is not an eligible expense.
- Employees cannot claim commuting expenses such as tolls and gas under the New Jersey Transit Benefits Law.
The 2020 monthly limit for commuter benefits is $270 of expenses incurred while using a transit pass or commuter highway vehicle, and an additional $270 of expenses incurred for qualified parking. Thus, an employee would be entitled to claim up to $550 per month of qualifying transit benefit expenses.
Penalties for Non-Compliance
A penalty in the amount of $100 to $250 dollars may be issued for a first violation of the New Jersey Transit Benefits Law. However, employers have 90 days to cure the violation before the penalty is imposed. If the employer does not cure the violation within the 90 day period, it will be subject to a $250 penalty for each additional 30 day period in which the employer fails to offer the benefit.
The Commissioner’s implementing rules and regulations, which have not yet been published, will provide employers with more information as to the interpretation of this Law.
Takeaway: Notify your employees that they are entitled to benefits under the New Jersey Transit Benefits Law.
If you are an employer and need help navigating the New Jersey Transit Benefits Law, or any other New Jersey employment law, contact Stephanie Gironda or any member of the Wilentz Employment Law Team.
The postings on this blog were created for general informational purposes only and do not constitute legal advice or a solicitation to provide legal services. Although we attempt to ensure that the postings are complete, accurate, and current as of the time of publication, we assume no responsibility for their completeness, accuracy, or timeliness. The information in this blog is not intended to create, and receipt of it does not constitute, a lawyer-client relationship. Readers should not act upon this information without seeking professional legal counsel.
This blog may contain links to independent third party websites and services, including social media. We provide these links for your convenience, and you access them at your own risk. We have no control over and do not monitor the content or policies (including privacy policies) of these third-party websites and have no responsibility for, and no liability with respect to, their content, accuracy, or reliability. Unless expressly stated, we do not endorse any of the linked websites or any product, service, or publication referenced herein or therein. We will remove a link to any site from this blog upon request of the linked entity.
We grant permission to readers to link to this blog so long as this blog is not misrepresented. This site is not sponsored or associated with any other site unless so identified.
If you wish for Wilentz, Goldman & Spitzer, P.A., to consider representing you, please obtain contact information from the Contact Us area of this blog or go to the firm’s website at www.wilentz.com. One of our lawyers will be happy to discuss the possibility of representation with you. However, the authors of Wilentz blogs are licensed only in New Jersey and/or New York and do not wish to represent anyone who viewed this site in a state where the site fails to comply with all laws and ethical rules of that state.