In the coming weeks, many companies within the five boroughs of New York City will implement a transit benefit program in order to be compliant with the New York City Transit Ordinance. This ordinance requires companies with 20 or more full-time employees to offer such a program by January 1, 2016.
The New York City Transit Ordinance will help companies save money, allow commuters to save money on everyday transit expenses, and reduce road congestion – an environmental perk that benefits all.
Did you know that New York City is the nation’s most utilized mass transit system? And, not by any small margin. In fact, New York City has more transit commuters annually than Chicago, San Francisco, Boston, Philadelphia, Los Angeles, Washington D.C. and Seattle combined1.
Not only is the New York City transit system heavily used, the cost of commuting is high, particularly for people traveling in from the suburbs. One big advantage of implementing a transit benefit, is giving employees the opportunity to save money on a necessary expense – getting to and from work each day. By enrolling in such a program, individuals can save more than $600 annually*.
Transit benefits also create financial advantages for employers, saving them money via lower payroll taxes. Employers don't pay payroll taxes on pre-tax deductions made by employees. These taxes are generally 7.65% of payroll**, so an employee who deducts the full $130 pretax monthly benefit could result in organizational savings of nearly $120 annually per employee!
If employee and employer savings aren’t reason enough to implement a transit benefit program, here’s one more. The ordinance will also reduce road congestion without taxing drivers, but rather by lowering the cost of commuting via public transit. Studies have found that when employees are offered transit benefits, nearly 1 in 5 people shift from single occupancy vehicles to public transportation2. By promoting the use of public transit, you are doing your part to help reduce traffic congestion, lower harmful carbon emissions and reduce energy consumption.
With similar ordinances in Washington D.C. and the San Francisco Bay area, I predict other markets following suit in the next year or two – and that’s good for all of us.
To learn more about how we’re helping New York City employers introduce commuter benefits to employees, visit us at www.wageworks.com/savenow-dt.
1 American Public Transportation Association
2 TransitCenter Study: The Impact of Commuting on Employees, February 2008
*Estimate based on the maximum pretax contribution of $130/month for a transit benefit over the course of 12 months. Individual savings may vary based on contribution amounts, income, individual tax rates, state of residence and other factors.
** Assumes annual earnings of each participating employee are below the Social Security Wage base of $118,500