Taking a New Route
After California recently enacted a law mandating that larger
employers in San Francisco offer commuter benefits, legal experts say other
metro areas may not be far behind.
By Kecia Bal
March 31, 2014 - Human Resource Executive Online
The Commuter
Benefits Program, which was recently signed into law by California Governor
Jerry Brown, requires employers with 50 or more full-time employees within the
jurisdiction of the Bay
Area Air Quality Management District in San Francisco
to choose among four commuter-benefit options.
But while these
employers must have their options in place by Sept. 30, the program does not
require employees to take advantage of the benefits, says Tom
Flannigan, the district's public information officer.
"The program has
been designed to provide flexibility for employers and to minimize
administrative and reporting requirements," says Flannigan. "The program
simply requires employers to make commuter benefits available. Employers are
not required to achieve any performance standard or target, nor are any
employees required to change commute mode."
The program, to be
offered to employees who work at least 20 hours per week and implemented by the
district and the Metropolitan Transportation Commission, gives employers the
following options:
·
Pre-tax benefit:
Employer allows employees to exclude their transit or vanpool costs from taxable
income, to the maximum extent permitted by federal law.
·
Employer-provided
subsidy: Employer provides a transit or vanpool subsidy to cover or reduce an
employee's monthly transit or vanpool costs, to a maximum of $75 per
month.
·
Employer-provided
transit: Employer provides a free or low-cost bus, shuttle or vanpool
service.
·
Alternative commuter
benefit: Employer provides an alternative commuter benefit that is as effective
as the other options in reducing single-occupant vehicle trips -- and/or vehicle
emissions.
Though information
is available
online now, the organizations are aggregating more resources, plus
registration information, at commuterbenefits.511.org, available
after April 1.
Flannigan says HR
professionals also need to designate
a commuter-benefits coordinator; submit an online registration form to the Air
District/commission and update company registration information annually; notify
employees of the commuter-benefit option and maintain records to document.
Employers also may be asked to provide information requested
for program evaluations, he says.
Of the options, the
most complex may be the fourth, says Gina
Roccanova, senior
employment and labor attorney with San Francisco-based Coblentz Patch Duffy
& Bass.
"I
think the thorniest issue for HR leaders is going to be in the area of
alternative-benefit plans," she says.
"You
must show that your alternative will result in the same reduction in
single-occupant vehicle trips as the first three, and you do have to go through
a preapproval process, she says. "Because employers have six months to comply,
if they are considering something other than those first three options, they
should already be gathering the data they are going to need to support that
option's approval."
Options
that already have been tested -- such as those used under existing
commuter-benefit programs -- are safest, she says.
Other
metro areas may follow suit, says Roccanova, especially in light of changes to
federal law -- which took effect in January and reduced the amount of pretax
benefits for parking or transit from $245 to $130 monthly.
"I
think that the chances are pretty good, in part because many municipalities are
in favor of increasing transit options and bettering air quality, especially
[in] larger areas," she says. "Unfortunately, the federal government is going
the opposite direction. [The pretax option decrease] might incentivize people to
drive instead of take a bus. Since that time, there has been some discussion at
the local level. It's the local level that bears the brunt of this -- not just
air quality but congestion, parking, all of these other things."
Many
employers will likely choose the pretax option, says Cheryl Orr, a partner at
the San Francisco office of Drinker Biddle & Reath.
For
employers that do not already have commuter programs in place, there are a few
considerations to account for when implementing these policies, she says.
"First,
qualifying employers must decide which of these plans best suits their specific
workplace," she says. "HR leaders may use the various benefits to attract new
talent and please employees. Most employers prefer the pretax option because
this program decreases the taxable earnings of employees and reduces the payroll
taxes owed by employers.
"Alternatively,
the employer-provided subsidy option estimates that employers would incur costs
of $9,600 per year for every ten employees who receive a $75 monthly subsidy,"
she says. "However, employers do not pay payroll taxes on this subsidy. Though
the subsidy is more costly to implement than the pretax option, some employers
and HR leaders may prefer the subsidy because it provides a tax-efficient way to
improve an employee's compensation package."
Some
Bay Area tech employers embrace the employer-provided transportation option and
tout it as a tool to recruit top talent. This option can be very expensive, but
employers can defray costs using the business expenses deduction for tax
purposes, says Orr. Collaborating with other businesses can cut costs, and
employees do not have to pay taxes on the value of employer-provided
transportation, nor does the employer have to pay payroll taxes on the value of
the benefit.
The
employer-provided transportation option, though, presents at least one large
legal concern for HR leaders, says Orr: When an employer furnishes employee
transportation to and from work, injuries sustained by the employee during
travel may be compensable due to worker's compensation laws.
"California
authorities have held that employers who make a substantial payment for travel
expenses to induce an employee to accept work at an extensive distance from his
or her home has impliedly agreed that the employment 'relationship shall
continue during the period of going and coming,' " says Orr.
Employers across the
country already are considering commuter programs without legislative prompting,
she says. Some Bay Area employers will not have to make any significant changes
to comply.
"Many employers
start commuter policies because they are environmentally friendly and provide
tax benefits for both employers and employees," says Orr. "For metropolitan
areas with traffic congestion and air pollution problems, such an ordinance
would be a positive step toward alleviating these concerns.
"Furthermore," she
says, "under pre-tax IRC Section 132(f) programs, employees reduce their taxable
incomes through the contribution of pretax dollars. In turn, this election
reduces the FICA tax assessments for both employees and employers. Thus, the
business benefits of such a plan are clear."
2014/03/31
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