On Friday, January 1, 2016, NYC's Commuter Benefits Law took effect. Pursuant to this law, all for-profit and nonprofit employers with 20 or more full-time non-union employees in New York City must offer their full-time employees the opportunity to use pre-tax income to purchase qualified transportation fringe benefits. This law will be enforced by the Department of Consumer Affairs (DCA), and was passed in an effort to reduce costs for commuting employees, help employers reduce their payroll taxes, and promote the use of public transportation.
Which Employers are Covered?
Only employers with 20+, full-time employees within New York City are within the purview of this statute. For the purposes of this law, "any employee who works an average of 30 hours or more per week, any portion of which was in New York City, for a single employer" is considered a full-time employee. Notably, this includes chain business, where "[t]he owner must count full-time employees at all of the chain business' locations in New York City to determine the number of full-time employees." Furthermore, "[a] temporary help firm that supplied a full-time employee to another organization is the employer of the full-time employee for the purposes of the law."
What are Permissible Commuter Benefits Programs?
"A commuter benefits program is a program that certain employers can offer under the provisions of Internal Revenue Code Section 132(f) to their full-time employees to use pre-tax income to cover certain transportation costs." (A list of permissible mass transit providers is located here.)
Recordkeeping and Enforcement
"Employers must keep records that demonstrate that each eligible full-time employee was offered the opportunity to use pre-tax income to purchase transit benefits and indicate whether the employee accepted or declined the offer." In terms of enforcement, employers are granted a six-month grace period to begin offering commuter benefits to their employees. If the DCA should find that the employer failed to comply with the law, employers can correct noncompliance within 90 days before DCA issues a violation. If noncompliance persists, "[e]mployers can be fined $100 to $250 for the first violation of the law if they do not cure the violation within 90 days. Thereafter, an additional fine of $250 may be issued after every additional 30-day period of noncompliance."
Recommendations for Employers
Although many employers within New York City are ahead of the game by already offering pre-tax transportation fringe benefits to their employees, the implementation of the new law should encourage all employers, both large and small, to reexamine their existing policies to ensure they are in compliance.
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