Transportation Plans

Tax savings for you and your employees. A Section 132 Transportation Program lets employees set aside a certain amount of each paycheck into an account - before paying income taxes. During the year, participants have access to this account for transit and parking expenses.

When employees use tax-free dollars to pay for these expenses, they realize an increase in their spending power, and substantial tax savings.

Transportation Benefits include the costs that employees might incur in their regular commutes to and from work. Under Section 132, the employer can redirect a portion of the employee’s salary to pay for such expenses on a pre-tax basis. While it may seem like just another benefit covered under a Cafeteria Program, by law, Section 132 benefits cannot be offered under a 125 Program. There are some distinct differences between the two programs as well:

• There are monthly dollar limits set by law. Any amount reimbursed over those statutory amounts must be included in the employee’s taxable income.
• Special rules apply to how and when benefits must be calculated.
• Unused amounts may be carried forward, but never refunded.
• No written program document is required, although employers may want to put the specifics of their program in writing.

Like a Section 125 Cafeteria Plan, Section 132 benefits do not apply to partners and 2% S corporation shareholders. In addition, independent contractors are not entitled to qualified transportation expenses.

Which type of transportation expenses are covered?
Qualified transportation benefits cover three distinct forms of transportation expenses, including costs for "Commuter highway vehicle transportation," "transit passes," and "qualified parking." The monthly dollar amount that an employee may redirect to cover these expense is adjusted each year for inflation.

Commuter highway vehicle transportation
is better known as 'van pooling." The vehicle, which must hold at least six adults, is operated by the employer and must be used 80% of the time for transporting employees to and from work.

Transit passes
include tokens, fare cards, vouchers, or similar items that entitle an employee to use mass transit facilities or van pooling services offered by an outside vendor (other than the employer).

Qualified parking
expenses are those incurred by an employee to park close by the employer’s business premises or at a location from which the employee commutes to work.

If you are interested in more information on the above plans, please contact us at:
Flex Contact