HCW Benefits Blog

Contributor:
Jenn Farrell, Client Coordinator and Consultant
Hill, Chesson & Woody

This past Tuesday in Greensboro, Rob Krieg and I presented, “It’s not Hip to be Square – Rounding Out your Benefits Program with Effective Ancillary Benefits,” and we received some good questions as a result.

Based on some follow-up survey responses, some people weren’t aware of the tax advantages of IRS Section 132 Transportation Plans.

Here’s a condensed explanation:

Section 132, a section of the IRS code, allows employers to set up a Qualified Transportation Plan, giving employees the ability to pay for certain qualified transportation expenses associated with traveling to and from work on a tax-free basis.   The IRS sets the maximum at $230 per month for some expenses.

Similar to a Flexible Spending Account Plan, the costs of eligible transportation expenses under this plan are completely exempt from Federal Income, Social Security and Medicare withholding.  Likewise, the employer’s expense for Social Security, Medicare and Federal Unemployment taxes is reduced.

Benefits for Employers

• No risk to employer
• Employer tax savings is often enough to cover the administrative costs to hiring a TPA
• Attractive benefit for recruiting employees
• No non-discrimination testing required
• Not an ERISA plan

Benefits to Employees

• Employees can deduct work-related parking and mass transportation costs on a pre-tax basis, saving approximately $.30 on every dollar elected and reimbursed through the plan.

Expenses eligible to be reimbursed under a Section 132 plan are:

• parking;
• transit passes;
• vanpooling (i.e., transportation in a commuter highway vehicle if such transportation is in connection with travel between the employee's residence and place of employment); and
• bicycle commuting expense reimbursements.

Have more questions regarding any other benefits topics? Feel free to ask them here or contact a Hill, Chesson & Woody consultant.