What is the Commuter Benefits Ordinance?
The City of Seattle passed a Commuter Benefits Ordinance requiring employers to offer a commuter benefit. This means businesses with 20 or more employees are required to offer their employees the opportunity to make a monthly pre-tax payroll deduction for transit or vanpool expenses.
How Companies Can Comply
There are many ways to comply, with the easiest and often most cost-saving option being Pre-Tax Commuter Benefits. Pre-tax commuter benefits are a simple and great way to help employees save on their commuting costs. Employers can provide the option of taking pre-tax deductions from employee paychecks each month to put toward qualified commuting expenses. In addition to saving employees hundreds of dollars, employers can also save as much as 8% on payroll taxes, making pre-tax benefits a win for everyone!
Employers can also easily invest in a ORCA for Business program for their employees. ORCA for Business provides subsidized transit passes to your employees. Learn more about ORCA for Business program options.
Connect with a specialist.
Did you know… all Seattle employers with 20 or more employees are required to offer a commuter benefit.
Here are a few advantages of offering pre-tax deductions:
- Offer commuter benefits that improve hiring and retention of highly skilled employees
- Promote the use of transit, freeing up parking and reducing congestion around your
- Save your employees up to 40% on their commuting costs
Read more details on the Commute Benefits Ordinance rules and regulations here.
How We Can Help
Provide New Benefits
If you’re an employer who wants to save employees money on their commutes but would like to know how, we can help.
Commute Seattle can help you find the right program for your business’ needs. If you’re interested in learning how your company can start offering pre-tax benefits, reach out to a Transportation Specialist at 206-613-3233 or Pre-Tax@commuteseattle.com.
Upgrade Current Benefits
If you’re a business already providing an ORCA or another transit pass to your employees and subsidizing part of the costs, you can save yourself and your employees even more by offering pre-tax deductions
Pre-tax deductions are a great addition to ORCA Passport or Choice accounts, allowing employers to subsidize their desired amount while saving themselves and their employees on their taxes.
What are Commuter Benefits?
Commuter benefits are codified in Internal Revenue Code Section 132(f) as, “Qualified Transportation Fringe”. They’re intended to encourage the use of alternatives to driving alone to work to reduce congestion and improve accessibility to downtown businesses. Employers can subsidize their employees’ commuting costs, allow employees to use their salary to pay for these expenses on a pre-tax basis or share the cost of their employees’ commuting expenses through a combination of an employer subsidy and an employee paid pre-tax payment.
Which commuting expenses are covered?
Public transit—bus, ferry, commuter train, light rail and streetcar. Parking expense,and vanpool, including but not limited to, Uberpool and Lyft Line. The monthly pre-tax limit is $270 for transit and $270 for parking, for a total of $540.
How much is this going to cost my business?
That’s the best part—Pre-tax benefits are almost always cost-neutral or cost saving for your business! The more your employees participate in this benefit, the more your company saves.
What is a pre-tax deduction?
A pre-tax deduction is an employee paid payroll deduction. It’s a federal transportation benefit that allows employees to set aside up to $260 a month to use on qualified commuting costs. By deducting this amount before taxes, the employee’s taxable income is decreased, thus lowering the taxes they pay.
What do the employer and employee save by offering pre-tax benefits?
If the employee uses a portion of their salary to pay for an eligible commuting expense, that amount up to the monthly limit is exempt from payroll taxes they would normally pay. This includes estimated federal income tax as well as Social Security and Medicare taxes (FICA taxes). Similarly, employers do not pay taxes on any amount set aside by their employees for this benefit.
Can I add pre-tax to my company’s current commuter benefits program?
Yes! For any partial subsidy of your employee’s commuting costs, combining it with pre-tax deductions will save them and your business even more money.
How many employees do I need to sign up for pre-tax benefits?
There’s no minimum, except for ORCA Passport. Learn more about ORCA Business Passport.
How do I begin offering pre-tax benefits?
The first step is choosing the best options for your business and your employees. Commute Seattle can help you with this! Either schedule a free consultation or view our Tax-Free Toolkit to consider your options.
Looking for more commuting options? We’re here to help.
From compliance to benefits, our transportation specialists will get you where you need to go.