NYC Pre-Tax Transit Benefits

NYC Pre-Tax Transit Benefits – January 2016

On October 20, 2014, the New York City Council signed the Affordable Transit Act, regulating the transit benefits for the New York City area.

Effective January 1, 2016, the law requires private employers with 20 or more full time employees to provide a pretax payroll deduction for transit benefits to their employees. For purposes of this particular ordinance, “full time employees” are those who average 30 or more hours per week. The number of full time employees is determined by taking the average number of full time employees for the last three consecutive months. Employers at or exceeding 20 full time employees will be required to comply with this ordinance.

Employees who receive this benefit remain eligible throughout the duration of their employment, regardless of any change in the number of full time employees within their work place (this includes a workforce drop below 20).

Transit Benefits will reduce the cost of transportation for employees who work within the five boroughs, and reduce employers’ payroll taxes. Public employers with employees that are exempt from federal, state, and city payroll taxes are not required to provide transit benefits by this mandate. Unionized employers are exempt unless 20 of their full time employees are not covered by a collective bargaining agreement (CBA).

Employers have a six-month grace period to implement the new law. The NYC Department of Consumer Affairs is responsible for enforcing this law. Beginning July 1, 2016, a violation may be given to employers who fail to offer the transit benefit; this violation can range between $100 and $250. If the first violation is not remedied within 90 days, employers may face additional violations until they are in compliance.

While many employers in NYC already offer pretax transit benefits, the new local law will require that other private employers put a transit benefit program into place. Employers should assess the requirements of the benefits program, communicate with their employees and plan for payroll changes to be in compliance with the new law.

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