Flex Transportation Program Options

[Mary C]

We currently have a Flex Transportion program offering pre-tax contributions toward the cost of transit passes and parking as defined in section 132(f). We were recently approached by a few individuals regarding qualfied bicycle commuting as added by President Bush in last 2008. At about the same time, we were also approached by a national flex transportation administrator who claims the qualified bicycle commuting benefits is entirely employer paid and cannot be deducted from employees salary on a pre-tax basis. I have read the regulations which aren't helpful and the guidance which doesn't mention bicycle benefits. Has anyone had any experience with this or can shed some light on this?

[MARYMM]

We currently have a Flex Transportion program offering pre-tax contributions toward the cost of transit passes and parking as defined in section 132(f). We were recently approached by a few individuals regarding qualfied bicycle commuting as added by President Bush in last 2008. At about the same time, we were also approached by a national flex transportation administrator who claims the qualified bicycle commuting benefits is entirely employer paid and cannot be deducted from employees salary on a pre-tax basis. I have read the regulations which aren't helpful and the guidance which doesn't mention bicycle benefits. Has anyone had any experience with this or can shed some light on this?

Bicycle benefits are not a pre-tax option but are tax free. Here's a link to ADP's newsletter which discusses this benefit and the limitations on it.

edited to add link
http://www.adp.com/tools-and-resources/new...tober_2008.ashx

This post has been edited by MARYMM: Oct 2 2009, 10:43 AM

[QDROphile]

IRC section 132(f)(4)

[Mary C]

MaryMM - there wasn't a link included with your reply.

QDROPhile, Section 132(f)(4) excepts bicycle commuting reimbursement "No amount shall be included in the gross income of an employee solely because the employee may choose between any qualified transportation fringe (other than a qualified bicycle commuting reimbursement) . . . . . . "

What I'm trying to get at, is if the benefit is tax free, but we can't withhold it from the employee pre-tax to reimburse him or her, where does the money come from? If its withheld after tax to be reimbursed after tax, what is the point? Or is the benefit entirely employer funded?

[QDROphile]

If something is an employee "benefit" and the employer can't provide just the "benefit" of allowing the employee to pay for the expense at the expense of the public fisc (compare section 125), then I don't see anywhere for the benefit to come from other than the employer. To put it another way, employers who are willing to subsidize bicycle commuting may do so, up to a point, without including the payments in the employee's income. The government thus joins the employer in the subsidy.

[masteff]

See the last full paragraph here: http://www.irs.gov/formspubs/article/0,,id=181059,00.html
Generally, qualified transportation fringe benefits are excluded from an employee's wages even if you provide them under a compensation reduction agreement. However, qualified bicycle commuting reimbursements do not qualify for this exclusion if made under a compensation reduction agreement.
Meaning, it's NOT a pre-tax mechanism.

If your company contributes toward the cost of transit passes or parking, then "qualified bicycle commuting reimbursements" would allow your company to contribute comparable money toward bicyclists. But if the company doesn't contribute anything (ie it's only a pre-tax mechanism) then it's not applicable for you.

[MARYMM]

MaryMM - there wasn't a link included with your reply.

QDROPhile, Section 132(f)(4) excepts bicycle commuting reimbursement "No amount shall be included in the gross income of an employee solely because the employee may choose between any qualified transportation fringe (other than a qualified bicycle commuting reimbursement) . . . . . . "

What I'm trying to get at, is if the benefit is tax free, but we can't withhold it from the employee pre-tax to reimburse him or her, where does the money come from? If its withheld after tax to be reimbursed after tax, what is the point? Or is the benefit entirely employer funded?

So sorry - I just added the link to the original post.

The benefit is entirely employer funded. There are restrictions if the employee is also receiving transit pass or van pool benefit

[WDIK]

A nograndeveintiocho:

¿Hay un propósito en traducir el párrafo ultimo de Mary C?

(Other than providing a link to your website?)

This post has been edited by WDIK: Nov 5 2009, 11:57 AM

[oriecat]

Spanish Spam? Spamish?