- The “Employee Commuter Transit Benefit Programs,” would apply to employers with 50 or more “covered employees.”
- Covered employees must be offered a pre-tax payroll deduction for mass transit expenses, qualified bicycle expenses, or an employer-paid benefit for a fare instrument.
- Employees will be covered employees if they have averaged working at least 30 hours per week in Philadelphia for the same employer in the previous 12-month period. Unpaid interns, volunteers, and those working in unpaid apprenticeships will not be considered covered employees.
The Bottom Line
On June 9, 2022, the Philadelphia City Council passed an ordinance that would require certain employers to make available to eligible employees a commuter transit benefit program. The bill is currently awaiting the Mayor’s signature, which many expect will occur shortly.
The new ordinance, entitled “Employee Commuter Transit Benefit Programs,” would apply to employers with 50 or more “covered employees” (but exclude government employers). Covered employees are those who have worked, on average, at least 30 hours per week within the boundaries of Philadelphia for the same employer in the previous 12-month period. Work must be “for compensation,” suggesting that unpaid interns, volunteers, and those working in unpaid apprenticeships are not covered. Also, employees who work for two or more employers, but do not average at least 30 hours per week with one of them, are excluded.
Covered employees must be offered one of the following types of commuter transit benefits:
- An election of a pre-tax payroll deduction for Mass Transit Expenses (expenses incurred for either a Fare Instrument such as a pass, token, or fare card, or expenses related to transportation in a Commuter Highway Vehicle) or Qualified Bicycle Expenses (which include reasonable expenses related to the purchase, maintenance, repair, and storage of bicycles regularly used for commuting to and from work), as allowed under the Internal Revenue Code §132(f)(1)(D), and (f)(5)(F); or
- An employer-paid benefit whereby the covered employer supplies a Fare Instrument for a covered employee pursuant to Internal Revenue Code §132(f)(2); or
- Any combination of the two.
To qualify as a Commuter Highway Vehicle, the vehicle must be used to transport groups of employees between their homes and work. This means that the vehicle must have a seating capacity of at least six people, and at least three employees must be transported to work 80 percent of the time the vehicle is used (excluding the driver).
Transit Benefits Are Consistent With Those Set Forth Under the Internal Revenue Code
The ordinance intends for benefit levels to be equal to the maximum amounts that the Internal Revenue Code permits for deductions of such benefits. With respect to the employer-paid Fare Instrument, the monthly limitation for the fringe benefit exclusion for transportation in a Commuter Highway Vehicle and any transit pass is $280 for calendar year 2022.
With regard to the Qualified Bicycle Expenses, for years 2018 through 2025, cyclists are not permitted to exclude qualified bicycle commuting reimbursements from their income for federal income tax purposes. However, employers are permitted to deduct these reimbursements as a business expense for years 2018 through 2025 for federal income tax purposes.
Enforcement and Penalties
Covered employees alleging a violation of this new law can report their employer to the agency designated by the Mayor to enforce these benefits. Upon receipt of the complaint, the enforcement agency will have 30 days to mediate the matter between the parties. Following this mediation period, a written warning will be issued to the employer if it is determined that the employer is non-compliant. If the employer remains non-compliant for 30 days following the issuance of the written warning, the enforcement agency may ask a court of competent jurisdiction to compel compliance and impose fines ranging from $150 to $300 per day, with each day constituting a separate violation.
The attorneys within Ballard Spahr’s Employee Benefits and Executive Compensation and Labor and Employment groups are following this legislation closely, and are prepared to advise employers on how to structure their fringe benefit arrangements to comply with this legislation once it is signed into law.
Subscribe to Ballard Spahr Mailing Lists
Copyright © 2023 by Ballard Spahr LLP.
(No claim to original U.S. government material.)
All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, including electronic, mechanical, photocopying, recording, or otherwise, without prior written permission of the author and publisher.
This alert is a periodic publication of Ballard Spahr LLP and is intended to notify recipients of new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.