By David Hubbard
Come December certain provisions of the American Recovery Act of 2009 will expire. The pre-tax $230 per month employee commuter benefit could revert to the former rate of $120 the Internal Revenue Service (IRS) allows. Or… this temporary spike in the monthly limit will stand permanently as a cost of living increase.
The outcome hinges on how two bills fare in the U.S. Congress that address the commuter benefits package.
The timing could not be more crucial for employees, employers and transit authorities faced to deal with the current state of the through either increased fares or reduced service. Meanwhile, tax-free commuter programs rank among health care, retirement and disability as the top benefits employers can voluntarily provide.
Two years ago public transportation had never looked rosier when fuel prices soared out of sight and heads turned to the economic benefits of public transportation. Now as news of transit in crisis pours in from everywhere in the country., and fuel costs beginning to creep up again, deep service cuts, layoffs and fare hikes are likely to continue to grip transit systems.
According to the most recent commuter impact survey by TransitCenter, the New York-based nonprofit advocate for the many benefits of mass transit, over 35 percent of American companies now offer a tax-free commuter benefit.
TransitCenter President and CEO Dan Neuburger says nearly half of the companies based in major metropolitan business districts such as New York, San Francisco, Los Angeles and Chicago offer this benefit, compared to 19 percent of companies located in the suburbs and outer reaches of cities. He says eight months after the stimulus bill took effect, TransitCenter saw a 35 percent rise in its own customer base from new companies adding the benefit. With the benefit presently set at $230 per month employers that provide this program earn an average $211 per employee per year in payroll taxes—up from $101 per employee at the previous $120 allowance.
“This is one of the few benefits that benefit both the employee and the employer,” says Neuburger. “It is important for transit agencies and participating companies to know the current level will sunset unless this measure passes.”
He notes that too many benefits can claim to help companies boost their compensation packages and save money at the same time.
TransitCenter is working diligently with members of Congress to maintain the current level after 2010. U.S. Senator Charles Schumer (D-NY) and Congressman James McGovern (D-MA) have introduced separate bills, S322 and H2891, that move to make the present state of commuter benefits law until further notice.
“These two members of Congress have been instrumental in this action, and have garnered nearly 40 fellow members as co-sponsors,” Neuburger says. “We have not heard one senator or representative oppose this action.”
He says the challenge now is to get the bills attached to the most advantageous pending legislation as soon as possible.
If for some reason Congress should fail to maintain the current benefit, Neuburger says it could severely affect the lives of the 4.5 million Americans who rely on public transportation to travel to and from their place of work.
“Commuters and their companies would both lose,” says Neuburger. “To put it in perspective, one in five of the national commuters live and work in New York City where the annual loss would amount to around $37 million. Ccompanies would eat at least $16 million per year in increased payroll taxes.”
This year TransitCenter has been meeting with major transit authorities throughout the country to remind operators how this benefit at its present level can take the sting out of fare hikes.
“If an agency increases fares by 25 percent, commuters can still save more than the increase,” says Neuburger. “We want operators to make their customers fully aware of this benefit and its advantages.”