Commuters who depend on the pretax transit benefit may find themselves making up the difference since the maximum benefit dropped at the end of 2013.
Brendan Saunders commutes daily from Kenosha, Wis. to Winnetka, Ill., a northern suburb, by Metra. His monthly pass is currently $192.25, and all of it was covered with pretax dollars until Dec. 31, 2013. Now, though, the maximum amount covered each month by pre-tax transit benefits has dropped to almost half of what it was in 2013. Saunders said “If that ability to get the pre-tax deduction goes down to $130, I will be faced with a $62.25 budget shortfall each month.”
As of Wednesday, Jan. 1, 2014, the pretax mass transit benefit for employees has been reduced from $245 per month to $130 per month. Previously, the American Taxpayer Relief Act raised the transit benefit limit to $245 monthly, on par with parking benefits. However, this amount was not permanent and expired at the end of 2013. The bicycle commuting reimbursement level remains at $20 per month.
Meanwhile, the monthly pretax parking benefit that employers can provide to drivers rose from $245 to $250 as of Jan. 1, 2014. This is the largest discrepancy between transit and parking components of the pretax commuter benefit. Previously, employees who took full advantage of the monthly cap of pretax payroll deductions could save over $1100 annually depending on their tax bracket. Employers also could save about $225 annually per participating employee on FICA taxes. With the $130 maximum, employee savings drops to approximately $587 annually, while employers save only about $131 on FICA taxes annually.
Chicago area commuters like Saunders who use Metra, Pace Vanpools or South Shore services are most likely to be impacted by this change. Stephen Crim, Research Director of Mobility Lab in Arlington, Va., recently told SHRM Online that “If an employee had been getting the full cost of his or her transit expenses paid for by the employer up to the old $245 cap, and if they employer decides to decrease the maximum benefit to the tax-free maximum of $130, then it could mean a lot of money out of a worker’s pocket.” For example, commuters who purchase Metra monthly passes between Zone A (downtown Chicago) and Zones D-M have monthly pass costs of over $130.
Is there any hope for this to change in 2014? Senator Charles E. Schumer, D-N.Y., has introduced Senate Bill 1116, the Commuter Benefits Equity Act, to restore parity to transit and parking benefits. As of this writing, Schumer plans to include the Commuter Benefits Equity Act in a broad tax package which is expected to be considered in the next few months.
What can you do in the mean time? Go to www.commuterbenefitsworkforus.com to learn more about this issue, and urge Congress to establish permanent parity between parking and transit portions of the commuter benefit.