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Employers should take note: more of their employees are coming to and going from the office via public transportation. That’s more than an interesting statistic -- it has implications for employers. Employees who take public transportation to work may benefit from a tax break, but only if their employer sponsors a qualified transportation fringe benefit (QTFB) plan under Code Section 132.
According to a study by the American Public Transportation Association (APTA), an organization whose members include local and regional transportation systems nationwide, commuting via public transportation is on the upswing in the United States. According to APTA, 2011 saw the second highest annual ridership since 1957. “Only ridership in 2008, when gas rose to more than $4 a gallon, surpassed last year’s ridership,” an APTA press release said.
Two top reasons for the increased ridership are higher gas prices and in certain areas, a recovering economy with more people returning to work,” said APTA president and CEO Michael Melaniphy, through the release. “Since nearly 60 percent of trips taken on public transportation are for work commutes, it’s not surprising to see ridership increase in areas where the economy has improved.”
An employer can pay for employees’ qualified commuting costs up to a point, or they may simply set up a plan under which the employee’s own money is made available to pay, on a pre-tax basis, for qualified commuting expenses. Regardless of whether employer or employee money pays the costs, there is a monetary limit. The IRS adjusts the limits each year for inflation.
This year, employees who commute via public transportation or vanpool can set aside (or their employers may pay) up to $125 per month to pay for transit fare under a QTFB tax-free. Even if $125 doesn’t cover the whole tab, having part of it be untaxed can be a help.
Of course, employees who drive to work -- either partway to a train station or bus stop or all the way to work --also can get a tax break for qualified parking expenses. The limit for that is $240 per month.
Why the big difference between transit and parking tax breaks? It hasn’t always been that way. Some have tried to fix the obvious inequity, and did so for a brief period.
Congress made the tax breaks for public transportation, vanpools and parking equal in 2009 as part of the American Recovery and Reinvestment Act. Problem was, an expiration date of Dec. 31, 2010 was written into the parity provision. Congress acted again before the sun set on that law -- which equalized parking and transit limits at $230 per month -- extending it until the end of 2011. However, the second extension has now expired and Congress has not yet extended it. Sen. Charles Schumer (D-N.Y.), whose constituents include a lot of transit riders, is working to make the equalization permanent, retroactively. Stay tuned.
Small businesses that seek to improve their retirement plans should have access to more information from the federal government. That is the recommendation of the Government Accountability Office (GAO), which in a recent report steers clear of advocating bold moves and suggests that the federal government improve what it’s already doing in order to better support small businesses in providing and administering retirement plans.
In a report released March 5, the GAO recommended creating an interagency taskforce between the U.S. Department of Labor (DOL), the Internal Revenue Service (IRS), the Department of Treasury and the Small Business Administration (SBA). This taskforce would “coordinate existing research, education, and outreach efforts to foster small employer plan sponsorship.”
The GAO’s proposed taskforce would capitalize on existing efforts to foster retirement plans — it would not implement new strategies. The GAO recommends the proposed taskforce, under the DOL leadership, should also research ways to bolster existing efforts and research existing plan designs’ cost-effectiveness.
The two recommendations from the GAO report that didn’t just tweak efforts already in place were: 1) to create a single web portal between the agencies for retirement plan information (a recommendation rejected by the DOL); and 2) for the IRS to modify tax forms to collect better information about retirement plans.
The GAO reached its conclusion after it analyzed data from the DOL and the IRS concerning small employers (those with 100 or fewer employees). And to be fair to the government, the retirement plan problems that many small employers reported — such as concerns about meeting fiduciary responsibilities, or a lack of financial resources, time or personnel — are
addressed via the DOL, IRS and SBA.
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