New York City Transit Benefit Mandate

Beginning January 2016[1], a New York City employer with 20 or more Full Time Employees (“FTEs”) is required to provide its employees with a pre-tax qualified transportation benefit program up to the limit permitted by Federal Law. Currently, the Internal Revenue Service permits a pre-tax transit benefit of up to $130[2]. The Act does not include the pre-tax parking benefits[3].

The New York City Transit Ordinance, Intro 295-A[4,] otherwise known as the Affordable Transit Act (the “Act”) was signed into law in the fall of 2014 by New York City Mayor Bill de Blasio. The Act defines a FTE the same as the Affordable Care Act, or as an employee that works at least 30 hours per week[5]. In addition, the Act specifically excludes government employers, employers not required to pay federal, state and city payroll taxes, and employees covered by a Collective Bargaining Agreement (“CBA”)[6].

Penalties
Employers required to comply with the Act, but which fail to implement a transit program will be subject to penalties between $100-$250[7]. An employer that fails to comply with the Act may receive a Notice of Non-Compliance. If so, the employer has a 90-day period to correct the violation without penalties. However, if the employer fails to correct the violation within the 90-day period, the employer will be subject to a $250 penalty for each 30-day period of non-compliance. Finally, employers have a 180-day grace period to comply with the Act, meaning employers will not be subject to any penalties until July 1, 2016[8].

Benefit to Employers
Although the Act will require additional administration and associated costs, its pre-tax feature will also benefit employers because payroll costs may decrease. As a result, the employer may pay less in payroll taxes by excluding certain income paid to its employees.

——————————————————————————————-
[1] Chapter 9, Mass Transits §20-926(d)§3
[2] IRC 1.132-9(b)(Q&A 11–15)
[3] §20-926(a)
[4] See the announcement: http://www1.nyc.gov/office-of-the-mayor/news/483-14/mayor-de-blasio-signs-intro-
295-a-law-expanding-right-pre-tax-transit-benefits-more
and Find the Local Law: http://www1.nyc.gov/site/dca/about/pre-tax-transit-benefits-law.page
[5] §20-926(a)
[6] §20-926(c)(i), (ii), (iii)
[7] §20-926(b)
[8] §20-926(d) §2

 

Disclaimer: USI does not provide legal or tax advice. For advice specific to your situation, please consult an attorney or other professional.
This summary is intended to convey general information and is not an exhaustive analysis.

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