In 2019, New Jersey became the first state to pass legislation (S.1567) that requires employers to offer pre-tax transit benefits to their employees. New Jersey joins cities like San Francisco and New York in the push to mandate transit benefits. The law applies to New Jersey employers with 20 or more employees. Employees are counted and eligible regardless of their residence. While the law has been in effect for some time, it won’t be enforced until March 1, 2020, or as soon as the Commission of Labor and Workforce Development releases detailed rules and regulations.
As the enforcement date gets closer, here’s what employers should keep in mind:
- Violations come with fines
- Once enforcement begins, employers who do not comply with the new law face financial penalties. Employers have 90 days from the date of the violation to offer a compliant pre-tax transportation fringe benefit program. If this requirement is not met, the employer is subject to a $250 penalty for each additional 30-day period in which the employer fails to offer the benefit. These penalties can add up quickly!
- Pre-tax fringe benefits are governed by the IRS
- Pre-tax transit plans, like the statewide mandate in New Jersey, must be IRS compliant. IRS regulations dictate eligible expenses, pre-tax limits, and reimbursements. One such stipulation states transit expenses must be purchased with pre-tax funds. Employers cannot reimburse employee transit expenses with cash or payroll deposits. Transit expenses can be purchased with an IRS compliant Transit Debit Card or through a compliant online platform tied to pre-tax funds to purchase specific transit fares, tokens, or vouchers.
- Employees aren’t the only ones who save money
- Employers save on FICA taxes (7.65%) for commuting costs deducted pre-tax from their employees. New Jersey’s transit benefits law doesn’t require offering parking benefits, but employers might consider including that benefit as well for additional tax savings. SHRM points out that a quality commuter benefit plan helps attract and retain highly talented workers.
BASIC specializes in industry-leading service and guaranteed plan compliance for employers who want stress-free benefits administration. We offer clients two IRS compliant transit programs: traditional transit with a Transit Debit Card, and WiredCommute, where participants can place orders for fare, passes, or vouchers to be mailed directly to them. Both services give employers the option to add parking benefits and come with a dedicated industry-certified service representative with direct dial access, so you can talk to the same person every time. Don’t delay complying with the NJ Transit mandate – request a proposal today!