1 / 34

Give a raise to your Employees

Give a raise to your Employees. And it won’t cost your company a dime. Pre-Tax Commuter Benefit: Quick Course. Presented by: Gayle Delanty Susan Whitmore. Today’s Agenda. Define pre-tax commuter benefit Answer the question, why an employer would want to give a pre-tax benefit

ivo
Download Presentation

Give a raise to your Employees

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript


  1. Give a raise to your Employees And it won’t cost your company a dime.

  2. Pre-Tax Commuter Benefit: Quick Course Presented by: Gayle Delanty Susan Whitmore

  3. Today’s Agenda • Define pre-tax commuter benefit • Answer the question, why an employer would want to give a pre-tax benefit • Provide simple steps to implementing a pre-tax benefit • Hear about an employer who has implemented the benefit

  4. How could your employee (Joe) gain from a pre-tax commuter benefit? • Save money on monthly bus pass • Enjoy the convenience of getting bus pass at work • Be reminded monthly that his employer is providing him a benefit

  5. Monthly Tax Savings for Joe using Pre-tax Income for a Transit Pass *For purposes of this example, Joe is married and his wife earns $36,000 a year. They have no children, don’t own their own home, and have no other sources of income or deductions.

  6. Monthly Tax Savings for Joe using Pre-tax Income for a Transit Pass *For purposes of this example, Joe is married and his wife earns $36,000 a year. They have no children, don’t own their own home, and have no other sources of income or deductions.

  7. Joe’s Actual Savings Joe saves $6.20 in FICA and $20.00 in Fed withholding - a total of $26.20 in tax savings each month. Joe’s $81 transit pass, less the $26.20 tax savings, effectively costs him $54.80, a 33% savings.

  8. How could your company gain from allowing Joe a pre-tax commuter benefit? • Enhance employee wage and benefits package • Provide a visible and valued employee benefit at no or low cost • Save nominally on FICA taxes (for Joe $74.40 per year, for 100 employees $7,440 per year)

  9. What is the Pre-tax Commuter Benefit? • Allowed by the federal tax code since 1998 • Employee-paid but requires employer involvement • A specified amount of employee salary is reserved before payroll taxes are deducted to buy transit or vanpool fare media and or qualified parking

  10. Section 132(f) vs Section 125 • Pre-tax benefits programs are treated under two sections of tax law: • 132 (transportation) • 125 (health care and other cafeteria plans) • 132(f) and 125 funds cannot be combined or co-mingled • Section 132(f) is easier to administer and more flexible allowing employee enrollment as often as monthly

  11. Section 132(f) vs Section 125

  12. Limits on Pre-tax Commuter Benefits • Transit or vanpool fares up to $115 per month, and • Qualified parking up to $220 per month (2008 tax year)

  13. Pre-Tax Parking Benefit • Up to $220/mo can be reimbursed from pre-tax wages ($2,640 annually) • Can be in addition to $115/mo transit/vanpool benefit • Company can pay parking provider directly from pre-tax set aside funds • Company can reimburse employee directly as long as a ‘bona fide reimbursement arrangement’ is used. • Check with your tax advisor for details

  14. What commute fares are eligible for the Pre-tax Benefit? • Fares on any mass transit (bus, rail, ferry) or public agency vanpool are eligible when paid with a pass, ticket or voucher (vouchers are redeemable for fare media) • Passes, ticketbooks and vouchers must be ordered and distributed by the employer (or Third Party Administrator) to the employee

  15. What about Cash Reimbursement? • Cash reimbursement is not generally allowed for pre-tax commuter benefit in our region because vouchers are readily available • Possible Exceptions: • train tickets purchased at vending machines • privately owned vanpool fares • parking

  16. Who Can Receive Pre-Tax Commuter Benefits? • All W-2 recipients can receive commuter benefits, including those working for: • Private sector companies • Non-profit companies • Federal government • State and local governments (when legislation permits)

  17. Who Cannot Receive Pre-Tax Commuter Benefits? • Self-employed persons (sole proprietors and partners) • 2% shareholders of S Corporations • Contractors

  18. Five basic steps to a Pre-tax Commuter Benefit 1. Decide it’s a go! 2. Make arrangements with payroll to set aside employees’ pre-tax wages 3. Communicate with/enroll employees 4. Buy the passes or vouchers employees need for bus, train, ferry or vanpool using set aside funds 5. Distribute passes/tickets/vouchers to employees

  19. Ordering Passes Pre-paid orders • Order online or by phone with a company Visa or Mastercard. • Order by regular mail with a credit card, company check or money order. The passes will be delivered to your company by regular or certified mail Buy on Consignment • A standing monthly order that will be delivered to your company each month by mail. Return unused passes and payment for passes actually sold or distributed. • Companies must purchase a minimum of 10 transit passes per month. FlexPass • FlexPass is an annual pass program offering lower-cost passes when you purchase for all your employees.

  20. When to Order Passes • With pre-pay, you need to order passes for Month B by the 20th of Month A. You will receive the passes within six days leaving time to distribute them to employees • Other considerations: • Timing of payroll • How often you allow employees to opt into or out of pre-tax program

  21. Pre-tax Implementation • Payroll approves simple form to authorize pre-tax benefit • Employees are notified of new benefit and 10 employees enroll using form • Payroll makes appropriate pre-tax deductions • Payroll assistant orders and distributes 10 passes: • 7 1-zone PugetPasses ($63 month) • 2 2-zone PugetPasses ($81 month) • 1 Ship-to-shore pass ($148 month)

  22. Other steps and issues... • Legal interpretation • Union issues • Administrative process - • simple for small companies • for larger companies can be complex but doable with well-defined process including timeline for action items

  23. Third Party Administrators • Mostly used by employers with large workforces, centralized administration and/or multiple worksites • Services that may be provided by TPA for a fee: • Enrollment services • Payroll deduction management • Ordering and distribution of passes and/or vouchers • Reporting and record-keeping

  24. Three ways to provide commuter benefits 1. Employee-paid pre-tax: Employee reserves income on pre-tax basis to pay for transit/vanpool fares 2. Employer-paid: Employer pays full cost of transit/vanpool fares 3. Shared cost: Employer pays part of cost and employee pays balance using pre-tax income or out-of-pocket In all cases, employers purchase the pass or voucher to deliver to employee

  25. More about shared-cost Commuter Benefits • Allowed by the federal tax code. • Employers may pay up to $115 per employee per month as a tax-exempt benefit - meaning the benefit doesn’t increase an employee’s taxable income. • Combined total of the employer and the employee contribution may not exceed $115 per month

  26. Pre-tax with FlexPass • Employee may be charged up to 50% of pass cost by employer • Employee can use pre-tax income to pay their portion • Employees must sign a FlexPass User Agreement • Can add pre-tax authorization to user agreement; no additional form necessary

  27. Leveraging pre-tax benefits: A comparison of value to Joe

  28. Leveraging pre-tax benefits: A comparison of value to Joe

  29. Leveraging pre-tax benefits: A comparison of value to Joe

  30. Reality Employer Programs • Tom Douglas Restaurants

  31. Additional Resources • Title 26 USC Section 132 (f) - “Qualified Transportation Fringe” and Federal Register/Rules and Regulations • That’s the Ticket product comparison guide • Online tools at www.metrokc.gov/pretaxpass/ • Gayle Delanty, King County Metro 206-263-3455 • Your Tax Advisor

  32. Pre-Tax Commuter Benefit - Thoughts to take with you • Simple and flexible • Low to no-cost to employer • Only available to employee with employer involvement

More Related