Photo: Adrianne Fielding
Your employees might be disappointed when they learn their tax exempt transit benefits are no longer $230 next month.
Commuter benefits for mass transit are a top benefit offered by companies. But the monthly $230 cap for mass transit is set to be cut nearly in half to $125 a month in just six days – beginning Jan. 1. Car commuters, on the other hand escape unscathed: The parking limit is set to increase, from $230 to $240 in 2012.
The IRS, which annually adjusts the limits according to statute, set the annual limit for the qualified parking benefit at $240 and the limit for mass transit and vanpools at $125 for 2012. Therefore, employers need to (1) reduce FSA transit benefits for public transportation; and (2) increase them for parking, in accord with the law.
But the change unduly hits employees who use public transportation: Those employees will see their public transport subsidy cut drastically from 2010 and 2011 levels. Many see the larger monthly subsidy for parking ($240) as an incentive to drop public transit and use cars instead to commute.
Here is a column by the CEO of WageWorks decries the inequity between the parking and transit tax breaks.
Congress appears very unlikely to extend the tax break at this late hour. Sen. Charles Schumer (D-N.Y.) in May 2011 introduced S. 1034, the Commuter Benefits Equity Act. Schumer’s bill would create parity between the mass transit benefit and parking benefit, would peg the mass transit benefit to the same rate and would increase it to $240 for next year.
But that bill has not had a hearing, and the parity between these two qualified transportation fringe benefits under Code Section 132 is set to expire Dec. 31 as provided for in the measure, which extended the parity to Jan. 1, 2012.