Putting the brakes on commuter expenses
In May of 2006, city experts at the Portland, Oregon research firm Sperling's BestPlaces studied gas prices in 80 U.S. metro areas -- and found eye-opening results. Of the top 10 most expensive places for driving to work, Atlanta ranked highest as the most expensive commute. The annual cost for two daily family drivers came in at over $5,700 spent on gas. San Diego commuters, ranked at number10, had an annual commute cost of $4,739.
Commuter expenses continue to whittle away at employees' paychecks as they face the increasing expense of making the daily trek to work. With the price of gasoline at a new high in the United States, spending $50 for a tank is no longer uncommon. As gas prices remain high, other trends are also developing, including increased telecommuting and movement away from sprawling cities and suburbs that are dependent on cars. And, the soaring cost of commuting may even spur some employees to consider quitting their jobs to seek employment closer to home. Innovative employers who recognize the impact of commuting costs on employee satisfaction and retention are taking the wheel and steering it in their favor by offering pre-tax commuter benefits to their workforce. "Rising fuel prices are shedding new light on why employers need to adopt this type of plan for their employees," said Jon Attwooll, Ceridian product manager. "If an employer can offer this benefit, it can give them a competitive advantage and distinguish them in the industry." Road map to tax savingsDriving the opportunity to provide commuter benefit services is the IRS Code Section 132(f)(3), which allows workers to set aside pre-taxed dollars to be used for work-related transportation expenses from mass transit and parking. While pre-taxed dollars cannot be used for expenses related to driving back and forth to work in a personal vehicle, the benefit encourages the use of mass transit. This can greatly reduce employees' commute-related costs and is also good for the environment by helping cut down on environment-polluting emissions generated from daily commuting. The pre-taxed dollars are exempt from federal income taxes, Social Security taxes and, in most cases, state income taxes. Offering such a plan can provide employees up to a 30 percent tax savings each year on mass transit and parking expenses. Play your cards right
On November 20, 2006, the IRS issued a long-awaited Revenue Ruling on the use of card technology for qualified transportation fringe benefit plans. The decision permits certain cards to be used with no substantiation requirements, such as copies of receipts. But unfortunately, the more widely available VISA® and MasterCard® merchant category code (MCC) debit cards require significant auto-substantiation. One of the new card options for commuter benefit plans is the smart card. The plastic cards are sold by transit authorities and have a memory chip which stores information including a serial number and the card's value. The cards can be used only for fare media and are currently available in a very limited number of metro areas. Another option, the terminal-restricted card, is a debit card that can be used only at points of sale where fare media is sold. The downside of these cards is that the merchant has to install a dedicated credit card terminal to be used only for transit expenses, and, therefore, adoption of these types of cards is expected to be very limited. Currently, Ceridian has chosen not to offer a card as part of our Commuter Administration Services until the IRS-approved card options become more "consumer friendly." Employees who are enrolled in the plan can simply go online to purchase fare media. Mass transportation vouchers and fare media are mailed out to participating employees each month so they can avoid the hassle of waiting in line at the transit station for their tickets. The Parking Reimbursement Account (PRA) can also be elected and reimbursed on a monthly basis, offering more flexibility for employees. "The IRS code requires that employers provide transit pass vouchers to their employees in metro areas where the vouchers are readily available," explained Attwooll. "Our services ensure that the employer is kept in compliance by providing voucher services for their employees." Ceridian's Commuter Administration Services can also free your staff from the administrative burdens of managing a transportation reimbursement program. We provide a holistic approach that supports all of your employee needs, including documentation, employee education, enrollment support, personalized assistance, claims administration and management of fare media. Let Ceridian design a unique plan for your industry and employee demographics that aligns with your company's objectives. Contact your Ceridian representative to learn more about Ceridian Commuter Administration Services and find out how to fuel your company's competitive advantage.
