If you work in New Jersey, your commute may be getting less expensive in the next year or so.
Earlier this year, New Jersey became the first state to mandate offering commuter benefits when Governor Murphy signed into law the New Jersey Senate Bill 1567. Joining large cities like San Francisco and New York City, New Jersey will be requiring employers to provide a pre-tax commuter benefit to their employees.
Here are the highlights of the New Jersey commuter benefits law.
How commuter benefits will work in NJ
Enforcement of the law in New Jersey could begin as early as March 1, 2020. When it launches, all companies that employ at least 20 people must start offering commuter benefits to eligible employees averaging 10 hours or more per week.
The New Jersey law follows the rules for transportation fringe benefits as defined by the IRS and excludes tax-exempt organizations.
Limit per month and commuter eligible expenses
This pre-tax benefit allows commuters to set aside pre-tax funds, currently a maximum of $265 per month, to use for commuting costs including mass transit, rideshares or qualified parking.
The benefit to businesses is that they pay up to 7.65 percent less in payroll tax because their employees will save money tax-free in their paychecks.
Employees who work under a collective bargaining agreement or are federal employees may have regulations that govern commuter benefits.
New Jersey is still working on specific rules and regulations for how commuter benefits will be regulated at the state level, and how the law will be enforced. However, there will be civil penalties if a business does not comply, as is typical with other municipal commuter benefit laws.
The new law does not require employers to subsidize transit expenses, it only requires employers to give employees the option to enroll in a pre-tax program whereby employees use their own wages on a tax free basis.
In addition to becoming compliant with the law, companies offering commuter benefits have a competitive advantage in hiring and retaining employees.
Programs can be administered using prepaid debit cards, smart cards, transit passes, direct pay, and cash reimbursement, along with other types of payments.
If you are a employer and wants to learn more, download a free toolkit guide to learn how to set up a compliant program that meets federal and state laws.