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NYC Transit Ordinance

  • Effective January 1, 2016, New York City employers, located in the 5 boroughs with 20 or more full-time employees are now required to offer pre-tax transit benefits!

Which employers are subject to this law?

  • Every employer with twenty (20) or more full-time employees in the city of New York shall offer full-time employees the opportunity to use pre-tax earnings to purchase qualified transportation fringe benefits.
  • Any employer found to be in violation of the provisions of this law shall be liable for a civil penalty payable to the city of New York.  For every 30 days in which an employer fails to offer such benefit, a new subsequent violation and a civil penalty of $250 dollars will be accessed. Violations will not occur before July 1, 2016.
  • Commuter benefits are considered tax-free benefits, not employee wages, so employers can save on average 7.65% in payroll taxes. Employees can enroll in monthly elections up to $255 for transit expenses and up to $255 for parking expenses.

WHAT CAN O.C.A. DO TO HELP?

  • O.C.A.’s commuter benefits solution offers simple transit and parking benefit administration!
  • Employee’s can receive O.C.A’s transit/parking debit card to pay for their commuter costs. Alternatively employees can be reimbursed for their expenses via direct deposit or paper check.
  • Employees will see an increase in their take-home pay due to the reduction in Federal and FICA taxes. Some employees will save 35%-40% on their commuting expenses!

Commuter benefits are structured as a monthly benefit. Unlike many other tax-favored benefit plans which are structured as annual plans.

  • The maximum tax-free election for qualified mass transit, as set by the IRS, is $255/month in 2016.
  • The maximum tax-free election for qualified parking expenses, as set by the IRS, is $255/month in 2016.

 

NYC Transit FAQ

FAQ provided by NYC Consumer Affairs

Which employers must offer commuter benefits?
Generally, non-government employers with 20 or more full-time non-union employees working in New York City must offer their full-time employees the opportunity to use pre-tax income to pay for their transportation by public or privately owned mass transit or in a commuter highway vehicle.


When do employers have to begin complying with the law?
Employers must offer full-time employees the opportunity to use pre-tax income to purchase qualified transportation fringe benefits, other than qualified parking, by January 1, 2016 or four weeks after an employee begins full-time work, whichever is later.


Will DCA enforce the law beginning January 1, 2016?
The law provides employers with a six-month grace period—from January 1, 2016 until July 1, 2016—before DCA is authorized to seek penalties. After July 1, 2016, employers will have an opportunity to cure (correct) any violation of the Commuter Benefits Law within 90 days before any penalty may be imposed.


Are employers required to give their full-time employees a written offer of commuter benefits?
Yes. Employers must give their full-time employees a written offer of the opportunity to use pre-tax income to purchase qualified transportation fringe benefits and maintain a record of the offer and employees’ responses.

II. EMPLOYERS COVERED/NOT COVERED BY THE LAW

Which employers are exempt under the law?
The law does not apply to:

  • Employers whose employees are covered by a collective bargaining agreement (CBA). Exception: If the employer has 20 or more full-time employees who are not covered by the CBA, the employer must offer these employees commuter benefits.
  • United States, New York State, and New York City governments, including any office, department, independent agency, authority, institution, association, society, or other body of the state, including the legislature and the judiciary.
  • Employers not required to pay federal, state, and City payroll taxes.

Does the law apply to chain businesses?
Yes.

A chain business is a group of establishments that share a common owner or principal who owns a majority of each location and are engaged in the same business or operate under a franchise agreement with the same franchisor as defined in New York State General Business Law Section 681. The owner must count full-time employees at all of the chain business’ locations in New York City to determine the total number of full-time employees.


Does the law apply to temporary help firms?
Yes.

A temporary help firm is a firm that recruits, hires, and supplies employees to perform work or services for another organization. A temporary help firm that supplies a full-time employee to another organization is the employer of the full-time employee for purposes of the law.

Temporary help firms that employ 20 or more full-time employees who are placed in New York City are required to offer those employees the opportunity to use pre-tax income to purchase qualified transportation fringe benefits, other than parking.


Does an employer have to offer commuter benefits if its workforce is reduced to fewer than 20 full-time employees?
An employer must allow the full-time employees who had been eligible to purchase commuter benefits before the workforce was reduced with the continued opportunity to use pre-tax income to purchase qualified transportation fringe benefits for the duration of their employment.

 

III. DETERMINING NUMBER OF FULL-TIME EMPLOYEES

If an employer has full-time employees who work in a borough other than Manhattan, do the employees in the outer boroughs count toward the number of employees?
Yes. The law applies to employers with 20 or more full-time employees working in New York City, which includes The Bronx, Brooklyn, Manhattan, Queens, and Staten Island.


If an employer has multiple locations, do all full-time employees count toward the number of employees?
Yes. If an employer has more than one location in New York City, the employer must count all full-time employees at all locations in New York City to determine the total number of full-time employees.

Scenarios:

An employer has two locations in New York City. The first location employs eight full-time employees. The second location employs 14 full-time employees. Would this employer be required to offer commuter benefits?
Yes. The employer employs a total of 22 full-time employees at the two locations. The employer must provide commuter benefits to all of its full-time employees.

An employer owns seven retail stores in New York City. Each location employs seven full-time employees. Would this employer be required to offer commuter benefits?
Yes. The business employs a total of 49 full-time employees at the retail stores. The business must provide commuter benefits to all of its full-time employees.


Can employers with fewer than 20 full-time employees working in New York City offer commuter benefits to their employees?
Yes.

DCA encourages all employers to offer commuter benefits to their employees because of the potential savings to businesses and employees.


Does an employer with fewer than 20 full-time employees working in New York City but more than 20 full-time employees working outside of New York City have to offer commuter benefits?
No. The law applies to employers with 20 or more full-time employees working in New York City only.

DCA encourages all employers to offer commuter benefits to their employees because of the potential savings to businesses and employees, however.

Scenario:

Ann’s Business employs 10 full-time employees and 10 part-time employees in New York City. Does Ann’s Business have to offer commuter benefits?
No. Although Ann’s Business employs 20 employees, only 10 of those employees are full time. The law applies to employers with 20 or more full-time employees working in New York City only.


If an employer is part of a chain business, do all full-time employees count toward the number of employees?
Yes. If an employer owns a majority of more than one establishment in the chain business in New York City, the employer must count all full-time employees at all locations in New York City to determine the total number of full-time employees.

IV. EMPLOYEES COVERED/NOT COVERED BY THE LAW

Which employees are covered under the law?
Full-time employees of for-profit and nonprofit organizations that employ more than 20 full-time non-union employees in New York City are covered.


Who is considered a full-time employee?
A full-time employee is any employee who has worked an average of 30 hours or more per week in the most recent four weeks as of any date of counting, any portion of which was in New York City, for a single employer. An employee who meets this threshold remains entitled to the benefit even if the employee’s working hours are reduced.


Does the law apply to employees working for a temporary help firm?
Yes. If the employee works an average of 30 hours or more per week for a minimum of four weeks, any portion of which was in New York City, the temporary help firm must offer the opportunity to use pre-tax income to purchase qualified transportation fringe benefits if the temporary help firm has 20 or more full-time employees. To determine the number of hours worked each week, employers must add the number of hours worked by the employee in the most recent four weeks at all placements.


Does the law apply to part-time employees?
No.

However, DCA encourages employers to provide commuter benefits to part-time, temporary, and seasonal employees.


Are commuter benefits programs beneficial for all employees?
Not necessarily. Using pre-tax income to pay for commuting will reduce monthly expenses for most employees. However, for some employees with lower incomes, in particular part-time and seasonal employees, the pre-tax transit benefit could reduce the amount of a tax refund, if employees are eligible for refundable tax credits like the Earned Income Tax Credit (EITC). DCA advises employees who may qualify for the EITC to consult a tax advisor or financial professional. To schedule a free one-on-one financial counseling appointment at an NYC Financial Empowerment Center, call 311 or visit nyc.gov/consumers. During tax time, the City offers free tax preparation services to eligible New Yorkers. To learn more, call 311 or visit nyc.gov/taxprep.


Does the law apply to full-time employees whose employer is located outside of New York City but whose job responsibilities require them to work occasionally in New York City?
Yes. Full-time employees whose job responsibilities require them to work occasionally in New York City are covered by the law if they worked an average of 30 hours or more per week in the most recent four weeks, any portion of which was in New York City, and if their employer has 20 or more full-time employees.

Scenario:

Dan’s Business is located in New Jersey, but it employs 25 full-time employees who work in New York City occasionally. Does Dan’s Business have to offer commuter benefits?
Yes. Dan’s Business employs 25 full-time employees who work occasionally in New York City and, therefore, the business must offer these employees the opportunity to use pre-tax income to purchase qualified transportation fringe benefits.


Does the law apply to employees who live outside New York City but commute to New York City to work full time?
Yes. The law covers full-time employees who work in New York City. It does not matter where employees live.

Scenario:

Jackie lives in New Jersey and uses New Jersey Transit to commute to her job at ABC Foundation, a New York City nonprofit that employs more than 20 full-time employees. Jackie works 35 hours a week, and has worked full time at the foundation for two years. Is Jackie covered by NYC’s Commuter Benefits Law?
Yes. ABC Foundation must offer Jackie commuter benefits.


Are independent contractors covered by the law?
No. The law applies to full-time employees only.

Whether someone is an employee or independent contractor depends on several factors. These include how much supervision, direction, and control the employer has over the services being provided. Workers may meet the legal standard for classification as employees but may be misclassified as independent contractors by their employers. For example, just because an employer issues a 1099 tax form to a worker, has a worker sign a contract stating he or she is an independent contractor, or rents a workspace to a worker (such as a chair in a salon) does not mean the worker is actually an independent contractor. More information is available from the New York State Department of Labor at labor.ny.gov. Search “Independent Contractors.”


Does the law apply to former employees?
No. The law applies to current full-time employees only.

 

V. TRANSIT COVERED/NOT COVERED BY THE LAW

What types of transportation costs are covered under the law?
Employees may use pre-tax income to pay for transit passes that can be used on public or privately owned mass transit or commuter vans with a seating capacity of six or more passengers.

See Appendix A for a list of mass transit providers.


Can employees use their commuter benefits to pay the cost of more than one mode of transit during their commute?
Yes. Employees may use their commuter benefits to pay for different eligible transit services during their commute. Effective January 1, 2016, an employee can use up to $255 a month of their pre-tax income under federal law for monthly transit expenses. However, an employee’s total transportation costs may exceed $255 each month. Many third-party providers offer programs where employees may deposit post-tax income in their account, if the employee’s monthly transit expenses exceed the monthly pre-tax limit.

Scenario:

George commutes to his full-time job at a bank in New York City using Long Island Rail Road (LIRR) and the subway. Can George use commuter benefits to pay for his train and subway costs?
Yes. George can use his commuter benefits to pay for his LIRR ticket and his MetroCard. However, effective January 1, 2016, the monthly cap on pre-tax commuter benefits is $255 per month, so George may not be able to cover all of his expenses with pre-tax income.


Does the law cover vanpooling?
Yes. The Commuter Benefits Law covers eligible commuter highway vehicles that seat at least six adults (not including the driver), use at least 80 percent of the mileage to transport employees between their residences and their place of employment, and transport at least half of the adult seating capacity during the trips. For more information, employers and employees may visit 511NYRideshare.org. For information about eligible vanpool services for commuters from New Jersey, contact the New Jersey Department of Transportation’s Vanpool Matching Service at 1-800-245-POOL (7665).


Does the law cover “dollar vans” or other commercial commuter van services?
It depends. The Commuter Benefits Law covers eligible commercial commuter van services that meet the requirements under Internal Revenue Code Section 132(5)(A)(iii). For more information, employers and employees may visit 511NYRideshare.org.


Does the law cover carpooling?
No. Qualified transportation fringe benefits do not cover carpooling, unless the vehicle meets the requirements of a “commuter highway vehicle” under federal law.


Does the law cover ferry services into and within New York City?
Yes. The law covers eligible ferry services into and within New York City. Employees should consult their human resource professional for more information on eligible ferry services.


May employees use commuter benefits to pay for Access-A-Ride?
Yes. Employees who qualify for paratransit services may use pre-tax income to pay for their commute using Access-A-Ride, AccessLink or CCT Connect.


May employees use commuter benefits to pay for a reduced-fare MetroCard?
Yes. Employees who qualify for a reduced-fare MetroCard may use pre-tax income to pay for their commute. To learn more about eligibility requirements, visit http://web.mta.info/nyct/fare/rfindex.htm.


Are employers required to offer commuter benefits for transportation on every eligible mode of transit?
Yes. The law requires that employers offer their full-time employees the opportunity to use pre-tax income to purchase qualified transportation fringe benefits on all eligible public or privately owned mass transit or in a commuter highway vehicle with a seating capacity of six or more passengers.

See Appendix A for a list of mass transit providers.


Are employers required to include qualified parking expenses in their commuter benefits program?
No. Qualified parking expenses are not covered by NYC’s Commuter Benefits Law. However, employees may use pre-tax income to pay for qualified parking expenses under federal tax law.


Are qualified bicycle commuting reimbursements covered by the law?
No. Under federal tax law, employees cannot use pre-tax income for the qualified bicycle commuting reimbursement benefit. However, qualified bicycle commuting reimbursement benefits may be provided tax-free as an employer-paid fringe benefit.


Are CitiBikes covered by the law?
No. Under federal tax law, bicycle rental fees are not qualified transportation fringe benefits.


If an employer provides its employees with a cash reimbursement for the qualified bicycle commuting reimbursement benefit, must the employer also offer employees the opportunity to use pre-tax income to purchase qualified transportation fringe benefits?
Yes. The employer must offer full-time employees the opportunity to use pre-tax income to purchase qualified transportation fringe benefits, even if employees are currently receiving a reimbursement for qualified bicycle commuting expenses. Although an employee cannot use pre-tax income to purchase qualified transportation fringe benefits during the same month(s) that the employee is receiving a bicycle commuting reimbursement, an employee must be given the opportunity to elect to use pre-tax income to purchase qualified transportation fringe benefits instead of receiving the bicycle commuting reimbursement.

IRS No Longer Allows Cash Reimbursemet for Transit

History of IRS Electronic Payment Card Guidance

The IRS first provided detailed guidance regarding the use of electronic payment cards for transportation benefits in Revenue Ruling 2006-57. The original January 1, 2008 effective date of Rev. Rul. 2006-57 was delayed several times, but the IRS updated its electronic payment card guidance in Rev. Rul. 2014-32. While Rev. Rul. 2014-32 is generally effective immediately, its ruling that employers may no longer provide cash reimbursements if a terminal-restricted debit card is readily available does not take effect until January 1, 2016.

Smartcards as Vouchers

Smartcards are defined as “cards that contain a memory chip storing certain information that uniquely identifies the card and value stored on the card, and that can be used either as fare media or to purchase fare media. If the value stored on a smartcard can be used only as fare media for a particular transit system, the smartcard qualifies as a voucher. And if the amount allocated to each employee’s smartcard is within the applicable monthly limit, employees are not required to substantiate their use of the smartcards, and the value provided through the smartcards is excluded from employees’ gross income and from their wages for employment tax purposes. O.C.A.’s mySource debit card complies with Rev. Rul. 2014-32. The mySource card is terminally-restricted and is considered a voucher.