Beginning March 1, 2020, New Jersey employers with 20+ employees will be required to offer pre-tax transportation fringe benefits to their employees. The law (Senate Bill No. 1567) was signed by Governor Phil Murphy on March 1, 2019.
Employers have the opportunity to offer their employees a pretax benefit by processing a payroll deduction in order to purchase a mass transportation monthly pass in an amount not to exceed $270 per month per employee. Using the pretax option, employers and employees save on Federal taxes and F.I.C.A. In addition, the business costs for Pension, Unemployment, Workers Compensation and Disability Insurance. In addition, the business costs associated with administering the program are tax deductible as business expenses. The amount an employee receives or deducts, up to the maximum, is not subject to federal income tax.
The employer can also choose to completely or partially subsidize the purchase of the employee monthly transit pass in an amount not to exceed $270 per month per employee, which is tax free to the employee and tax deductible to the employer.
The employer can also choose to completely or partially subsidize the purchase of the employee monthly transit pass in an amount not to exceed $255 per month per employee, which is tax free to the employee and tax deductible to the employer.
If the employee vanpools, this pretax option or subsidy can be applied to the commuter’s vanpool lease. Call us to learn more and assist you in providing your company with these savings.
An example of possible dollar savings to both the employee, as well as the employer: If the employee uses pre-tax dollars to purchase monthly bus or rail passes at $270 per month, depending on the individual’s tax bracket, he or she could enjoy an annual savings of nearly $1000. The employer would save about $200 per participating employee.