Employee Benefits Institute of America

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Bicycle Commuting Fringe Benefit Added to Code Section 132(f)

From the October 09, 2008 EBIA Weekly

[Emergency Economic Stabilization Legislation, Pub. L. No. 110-343, Div. B (Oct. 3, 2008)]

For a copy: http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_bills&docid=f:h1424enr.txt.pdf

A new bicycle commuting fringe benefit has been added to Code Section 132(f) as part of the emergency economic stabilization legislation that was signed by President Bush on October 3, 2008. (For information about the legislation’s mental health parity provisions, see see our article at http://www.ebia.com/WeeklyArchives/GHPM/Statutes/19536 (Premium Access subscription required).) The new law allows employers to reimburse employees on a tax-free basis for certain bicycle commuting expenses incurred after December 31, 2008. The maximum annual benefit is $20 times the number of months during the calendar year in which the employee regularly uses a bicycle for a substantial portion of the travel between the employee’s residence and place of employment. (The $20 amount is not indexed for cost-of-living changes.) Months in which the employee receives any other qualified transportation fringe benefit under Code Section 132(f) are disregarded. Reimbursable expenses include the cost of purchasing a bicycle, bicycle improvements, repair, and storage, so long as the bicycle is regularly used for travel between the employee’s residence and place of employment. Unlike other qualified transportation fringe benefits, the qualified bicycle commuting benefit cannot be funded with pre-tax compensation reductions. Reimbursements must be made during the calendar year in which the expenses are incurred or during the three months following that year in order to qualify for income exclusion.

EBIA Comment: Proposals to add a bicycle commuting benefit to Code Section 132(f) have been introduced in Congress since at least 2001. Given the cost of gasoline in recent months, it should not come as too much of a surprise that this benefit has finally become law. The new law’s provisions leave a few open issues—for example, the law does not define the terms “regular use” (of a bicycle) or “substantial portion” (of an employee’s commute), nor does it provide much detail about the expenses that are reimbursable or how those expenses should be substantiated. Perhaps the IRS will provide additional guidance on this new benefit in the near future. Employers who wish to begin providing this benefit when it becomes effective on January 1, 2009, will need to move quickly to prepare the necessary forms and employee communication materials, and to consider what plan documentation may be desirable to memorialize the benefit. For more information about qualified transportation fringe benefits, see EBIA’s Fringe Benefits manual at Section III (“Qualified Transportation Plans”), which will be updated to reflect the new legislation.

Contributing Editors: EBIA Staff.

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