Los Angeles County Metropolitan Transit Authority is excited to launch the LA County Commuter Tax Benefit in 2021.
This ordinance will help employers reduce their payroll taxes and provide employees with the opportunity to save on their commute cost. Starting in January 2021, employers in LA County with 50 to 249 employees at their worksite, will be required to offer their employees the option to use pre-tax dollars for vanpooling, transit, and parking at Park and Ride lots and transit lots.
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California Assembly Bill #2548/ LA County Commuter Tax Benefit
In October of 2018, Governor Brown signed Assembly Bill 2548 into law, authorizing Metro to “adopt, and revise as necessary, a commute benefit ordinance that requires covered employers operating within the authority’s area to offer all covered employees a pretax option program, consistent with Section 132(f) of the Internal Revenue Code, allowing covered employees to elect to exclude from taxable wages employee commuting costs incurred for transit passes or vanpool charges, up to the maximum amount allowed by federal tax law.”
Which employers must adopt the LA County Commuter Tax Benefit?
All non-profit and for-profit employers in Los Angeles County with a total of 50 to 249 employees (full-time and part-time) at a single worksite, must offer a commuter tax benefit to every full-time employee at that worksite. Under the guidance of IRS Code 132(f) (Commuter Tax Benefit), employees will have the opportunity to use up to $270 per month in pre-tax dollars (as of 2020) to pay for vanpooling, transit, and parking at Park and Ride lots and transit lots.
If an Employer’s worksite is in a city that has a transportation ordinance, or if the employer offers an equitable commuter benefit, they may be exempt from the ordinance. Employers with more than 249 employees at a worksite will continue to comply with South Coast Air Quality Management District (SCAQMD) Rule 2202 .
What are the advantages of the LA County Commuter Tax Benefit?
A commuter tax benefit is like a Healthcare Savings Account (HSA) or Flexible Spending Account (FSA). Once implemented, the tax benefits can help both employers and employees, by offering and easy way to save both money.
- Employers can save by reducing their payroll taxes (a minimum of 7.65% for Federal Insurance Contributions ACT (FICA) taxes). As the number of employees enrolled in the benefit increases, the employer’s tax savings also increases. As an example, if one employee sets aside the full $270 per month pre-tax, their employer can save $243 or more per year on payroll taxes.
- Employees can save by using pre-tax dollars to lower their monthly commute expenses for vanpooling, transit, and parking at Park and Ride lots and transit lots.
The commuter tax benefit can also help:
- Employers attract new employees and retain current employees. Research shows that a commuter tax benefit requirement can help lower-waged employees access their worksite and retain their job.
- Employers save by lowering their turnover rate. According to a Society for Human Resource Management (SHRM) survey , it takes 42 days to fill a vacant position. Employers risk losing thousands of dollars on hiring costs and over a month of lost productivity if a new hire's commute isn't manageable or cost-effective.
- Employees improve the environment. Research shows that by switching from drive alone trips to environmentally friendlier commute options such as transit, an individual can significantly reduce greenhouse gas (GHG) emissions, which also helps employers meet air quality regulations and sustainability goals.
LA County Commuter Tax Benefit Implementation
The Metro Board is slated to approve the ordinance language in 2020, and the ordinance is projected to start in January of 2021. Beginning in January of 2022, applicable employers must comply with the ordinance or face penalties.
If you have any questions about the LA County Commuter Tax Benefit, please contact CTB@metro.net