Transportation Program

What is a Transportation Program?

• Provides eligible employees with a pre-tax benefits for qualified expenses relating to transportation to and from their home and office
• Each dollar of employee salary reduction simultaneously reduces the employer's payroll taxes
• Qualified expenses are broken down into two categories: parking and mass transit. These programs may be used simultaneously.

What are qualified parking expenses?

• Parking expenses incurred on or near the business premises or a location from which the employee commutes to work by mass transit
• The 2008 cap on reimbursements for parking is $220 per month, as indexed annually by the IRS.

What are qualified mass transit expenses?

• Purchase of tickets or transit passes [including a pass, token, fare-card or voucher and highway vehicle transportation (van pooling) incurred between a residence and place of business]
• The 2008 cap on reimbursements for mass transit is $115 per month, as indexed annually by the IRS.

How can the employee get their expenses pre-tax?

• Employers agree to a pre-tax reduction of compensation from the employee's paychecks to cover parking and mass transit expenses. Federal income taxes and social security taxes are calculated on the reduced compensation resulting in tax savings for the employee.
• Should an employee not incur and file claim for all the monies withheld in a given month or plan year he/she will not lose it.
• While this is not a "use it or lost it" scenario, the employer may not directly reimburse the employee for unused funds.

How do you implement a Transportation Program?

• Only an employer can establish a transportation program for employees.
• A Written Plan Document is not required.
• There is not a requirment to file an Annual 5500.

Who may not participate in the pre-tax benefits of the Transportation Program?

• Self-employed including sole proprietors, partners in partnerships and directors of corporations (Spouses of the sole proprietors and partners may participate in the program as long as they are an employee of the company.)
• More than two percent shareholders in a sub chapter S corporation (Grandparents, parents, spouses, children and grandchildren of the shareholders are deemed to own what the shareholder owns and may not participate in the plan.)
• Officers or partners in LLCs & LLPs treated as partnerships