If you’re an employer, chances are at least one of your employees has to commute to get to your business for work. And if your business is smack dab in the middle of a big city (e.g., New York City), those chances increase.
According to one source, 76% of individuals drive themselves to work every day. And, only 9% of people carpool with another individual.
With so many people commuting to work, more states are starting to consider compensating employees for certain transportation-related expenses. New Jersey has become the first state to require employers to offer pre-tax transportation benefits to employees.
Read on to learn about NJ transit benefits, including whether you’re responsible for offering transportation benefits and when employees can begin receiving fringe benefits.
New Jersey pre-tax transportation benefits
On March 1, 2019, New Jersey’s governor signed a law requiring NJ employers to offer commuter transportation benefits to eligible employees. This law is most commonly referred to as the New Jersey Transit Benefits Law.
The goal of the NJ Transit Benefits Law is to reduce the financial burden of fares and parking costs for commuting employees.
Typically, a transportation fringe benefit covers things like:
- Transportation in a commuter highway vehicle for travel between the employee’s residence and place of employment
- Transit passes (e.g., rail or bus passes)
- Qualified parking
There are similar pre-tax transit benefit programs in place in other cities, such as:
- New York City
- Washington D.C.
- San Francisco
- San Francisco Bay Area
If you’re a New Jersey employer, you can’t ignore the new pre-tax transportation benefits law. To make things less confusing, check out some common questions and answers below about the new regulation.
Who is subject to the new law?
New Jersey employers with at least 20 employees must offer a pre-tax transportation fringe benefit option to employees.
Employers with fewer than 20 employees (including union employees) are not required to offer benefits at this time.
Who is exempt from the NJ pre-tax transportation law?
Employees who are subject to a collective bargaining agreement are not eligible for the NJ transit benefits.
Also, the new law will not apply to federal government employees. However, nonprofits—as well as state or local government employers—are not exempt from offering the NJ commuter tax benefit.
When does New Jersey’s pre-tax transportation benefit begin?
Although the law was signed in March 2019, it will not go into effect until (at the latest) March 1, 2020. However, there’s a chance that the law could go into effect before March of 2020.
The effective date depends on when the New Jersey Department of Labor and Workforce Development finalizes rules and regulations for the new law.
How much can employees receive in transit fringe benefits?
If the law goes into effect before March of 2020, the maximum monthly amount for 2019 for the pre-tax transit benefit is $265/month for commuter highway vehicle benefits and transit passes (combined). The 2019 cap for qualified parking is also $265/month.
Keep in mind, the above amounts are subject to change in 2020.
What are the penalties for employers who don’t comply?
Any New Jersey employer who fails to offer transit benefits will be subject to a penalty of at least $100 for the first violation. The maximum penalty for an employer’s first violation is $250.
Employers have 90 days to offer the transit fringe benefits before the penalty is imposed. And, employers who fail to offer benefits after 90 days are subject to additional penalties.
Employers can receive a $250 penalty for each additional 30-day period that they do not comply.
Preparing for the New Jersey transit benefits
Because the transit law is currently “inactive” until March of 2020 (again, at the latest), you have plenty of time to prepare your business for the new regulation.
Here are some things to do in the meantime if you’re a New Jersey employer:
- Do your research on transit benefits program requirements
- Prepare to discuss transit benefits with your employees
- Get ready to respond to employee inquiries about the new law
- Contact New Jersey with questions and express concerns
- Monitor the state’s website and the web for new regulations of the law
For more information about New Jersey’s pre-tax transportation fringe benefits, consult the state.
Looking for an easy way to track the benefits your business offers? Patriot’s payroll software will calculate deductions on your behalf and makes payroll a breeze. Get started with your self-guided demo today!
Interested in learning more payroll topics? Head on over to our Facebook and give us a like. We always enjoy making new friends!
This is not intended as legal advice; for more information, please click here.