Qualifed Transportation Fringe and Transit Passes

[Guest Rod Steger]

Qualifed Transportation Fringe and Transit Passes

Does anyone understand the IRS Proposed Rules on Qualified Transportation Fringe as it relates to transit passes?

The way I read the rules, if a community or transit district makes readily available (without significant administrative costs) to employers vouchers which can be exchanged for fares, then the employer cannot allow employees to purchase the fares with pre-tax dollars on a reimbursment basis.

If this is the case, it seems that the employer is expected to provide these vouchers to employees at the employer's expense, e.g. free to the employee (with no salary reduction). What is the incentive for employers to do this?

[Guest jgroves]

The meaning behind this is to stop direct cash reimbursement. Instead, if a voucher is available and it's not a significant cost to the employer to get/do the voucher for the employees (significant cost is a whole other can of worms), then the vouchers must be used. This is mass transit, not parking. See my post of a month ago that no one has responded to re: parking benefits.

[Guest mdrucker]

The employer has a choice, you can provide the vouchers for free to the employees of you can take the pre-tax deduction from the employee after you purchased the voucher. The regs have some rules that favor vouchers if vouchers are readily available, but voucher programs differ throughout the country. The issue on vouchers only apply to mass transit, not parking. You can contact me through my company's website if you want to discuss further.

Final regs have been issued.

Mike

[Guest jgroves]

The real kicker to the IRS final regs is that they define what "significant cost to the employer" is. The cost does NOT take into consideration the administrative cost. For example, vouchers are readily available but you have employees scattered throughout the city and you must hand deliver the vouchers to each location. The cost of sending someone out all day to do that does not count. Only the actual cost of purchasing the vouchers is taken into consideration.

[Guest garvey_agg]

With regard to the "readily available" requirement, the summary to the final regs provides that service fees and delivery costs can be viewed as affecting whether vouchers are readily available.

If it costs an employer $30 in delivery charges to pick up a $70 transit card (the transit card costs the same amount for anyone who purchases it - employer or employee), would that be sufficient to deem the voucher as not readily available (such that the employer could permissibly reimburse the employee for the cost of the voucher)? Or, is the delivery charge an "internal administrative cost" to the employer (and not part of the equation)?

How does the 1% rule come into play - if the voucher provider charges a service charge to the employer that is over and above the cost of the voucher itself?