Transportation Benefit Dilemma

[Guest J OLeary]

I am an HR Director at an educational institution looking for some insite on transportation benefits for faculty and staff. In particular I am interested in hearing what other's provide in the form of parking benefits. We provide a small subsidy for full time and an even smaller subsidy for part time. Costs are increasing and it is getting tougher to consider this a benefit. Any ideas out there?

[Guest Margaret]

What is your vacation/time off plan like? At our facility we, too, have to pay a good portion of the parking costs but we allow our employees to use their Paid Time Off (PTO) to cover that cost per pay period. They must elect this otion on an annual basis and cannot change during the course of the year. It does allow the flexibility to use time earned to cover that cost and not have the cost of parking become a 'big' dent in their pay.

[Guest Lori Senter]

You might want to check into Sec. 132 of the IRC at the Transportation benefits available. Our firm is researching this, and it looks like we will be providing what amounts to a "flexible spending account" for parking/public transportation costs on a pretax basis. There's been several articles on this issue lately, and it should be pretty easy to find information.

[Guest Do]

To Lori Senter: Does this benefit have to follow a FSA model? Why couldn't it follow a business expense model so that accounts would not have to be maintained for each participating employee?

[Guest Do]

Thank you for your response Lori Senter.

JPCMPLS: I understand what you are saying. It was the Transportation Equity Act that allows the cash option to be expanded to van pool and mass transit cost. I agree a FSA-type plan works; however, I don't see why 132(f)(3) or (4) REQUIRE a FSA-type plan.

I guess, what I am looking for is someone to either: 1) agree that these benefits can be offered under different models and that the FSA model is only one; or 2) explain 132(f) requires a FSA model (maybe because the wording is very close to 125). The FSA model is the "bandwagon" and I am questioning whether that is the only wagon or the right wagon (as far as efficient and convenient) to jump on. I fear that the FSA model became the bandwagon by consultants and service providers in the FSA plan market looking to expand their business. Call me cynical.

[Guest Lori Senter]

I'm not sure of all the ins and outs, but our plan has been reviewed every way from Sunday by legal, tax, etc. people and the model they're allowing is an FSA model. You'd have to actually look at the statute to see details, but I know this is what they've asked me to communicate (I'm the benes comm specialist). Sorry I can't be more helpful.

[Guest JPCMPLS]

The Transportation Act expanded the transit benefit provisions to allow the cash option (FSA) for parking and now, bus/mass transit. The old rules still apply for reimbursement of qualified transit expenses up to the statutory limits (business expense model) - $65/mo. for commuter vans and/or mass transit passes or $175/mo. for parking.

[Guest ESOPwizard]

All that you need to offer a pre-tax transportation benefit are election forms and a shoe box

(or some other means of collecting receipts). There is no need for a plan document.

Remember that amounts excluded from compensation for transportation benefits are NOT section 415

compensation, and therefore, 401(k) elections, matching contributions, pension benefits, insurance

benefits, HCE determinations, etc are NOT based on the amounts excluded from compensation unless

you amend your plans/policies. If you amend your plans, you may need to use an (a)(4) general

test and may not be able to use a prototype document.

Your every which way consultants did explain this to you, didn't they? If you feel underconsulted,

please feel free to "write".

[Guest JPCMPLS]

What I meant by the "old rules" was a business expense reimbursement model where all you need to do is notify employees of the policy for reimbursement and establish the limitations and procedures for an "accountable plan". This would require direct payment or verified reimbursement (submitted receipts or passes), to achieve the desired tax result. Giving someone a cash allowance "for qualified transportation expenses" isn't going to be enough.