Commuter Benefits in the State of New York

Effective January 1, 2016, under a new local law in New York City most employers with 20 or more full-time employees (employees who work an average of 30 hours or more per week for such period of time as established by rule) must offer full-time employees the opportunity to use pre-tax earnings to purchase qualified transportation fringe benefits-other than qualified parking-in accordance with federal law.
 

Note: In the event that such employer's number of full-time employees is reduced to less than 20, any employee eligible to be provided such opportunity prior to the employee reduction must continue to be provided such opportunity for the duration of such employee's employment.

Exceptions

Certain entities are exempt from these requirements, including:

  • Certain public employers;
  • Where a collective bargaining agreement exists between any group of employees and an employer (except that, where the number of full-time employees not covered by any such agreement is 20 or more, those full-time employees not covered by any such agreement are eligible for such benefit); and
  • Where such employer is not required by law to pay federal, state and city payroll taxes. In addition, the Department of Consumer Affairs may waive the requirements of the local law for an employer if such employer has demonstrated to the satisfaction of the Department of Consumer Affairs that the offering of such benefit would be a financial hardship.

 

Effective Dates
The law is expected to take effect January 1, 2016. To allow businesses adequate time to adjust to the new law, employers are not expected to be subject to penalties that take place before July 1, 2016. In the event qualified transportation benefits are no longer permitted to be excluded from an employee's gross income for federal income tax purposes and from an employer's wages for federal payroll tax purposes, the local law will no longer be effective.
 
The new Administrative Code provision refers to an employer "with twenty or more full-time employees in the city of New York," so we believe the ordinance is only intended to apply to employers who have at least 20 FT employees within the five boroughs that make up New York City.  This should exempt an employer, for example, that is based in Texas but has only 19 employees working out of an office in NYC (whether it has FT employees working in other areas of NY or not).  Employers who are close to the threshold will likely want to monitor this issue closely, to avoid the potential application of penalties.  However, note that the initial penalty even where a violation does occur would be no more than $250, and the employer would be given 90 days to cure that first violation before any additional penalties would be incurred.
 
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The information provided is for educational purposes only. This information is from sources we believe to be reliable, but we cannot guarantee or represent that it is accurate or complete. The opinions are those of the writer, and the opinions and information presented are subject to change without notice.

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