New Jersey Governor Phil Murphy signed S.1567 into law March 1, 2019. New Jersey is the first state to require employers to offer pre-tax commuter benefits to employees. New Jersey joins several cities, including Washington DC, Seattle and San Francisco, to make such a mandate. The new law applies to employers with 20 or more employees. Employees need not reside in New Jersey but must be employed in the state. The law is currently in effect but will not be enforced until March 1, 2020, or as soon as the Commission of Labor and Workforce Development releases detailed rules and regulations.
Once established, employers face fines if in violation. Employers have 90 days from the date of the violation to offer the pre-tax transportation fringe benefit program. If, after the 90-day cure period, the employer does not adopt a pre-tax transportation fringe benefit, it will be subject to a $250 penalty for each additional 30-day period in which an employer fails to offer the benefit.
To help increase public awareness the New Jersey Turnpike Authority and the South Jersey Transportation Authority will launch a public awareness campaign. The campaign will encourage the public to contact their employer about pre-tax transit fringe benefits. New Jersey employers should start planning now on the steps needed to provide this benefit.
Employees aren’t the only ones that benefit from a pre-tax commuter fringe benefit program. Commuter benefits fall under IRS Section 132, which allows a set amount of monthly Parking and Transit expenses exempt from taxes. Employers save on FICA taxes (7.65%) for each employee pre-tax dollar. New Jersey’s law doesn’t require offering parking benefits, but employers might consider including that benefit as well for additional tax savings.
The IRS offers a separate pre-tax monthly maximum for transit and parking expenses. For 2019, they are each set at $265. An employee making $50,000 a year with $265 in monthly transit expenses would save $700 a year with this pre-tax benefit. Likewise, an employer with 250 employees and 30% participation would save $18,245 in one year of FICA taxes.
Don’t be caught unprepared. Contact BASIC to set up our BASIC Parking & Transit plan. Request a proposal or call 888-602-2742 to be put in touch with your Regional Director.