Stimulus Package a Victory for Mass Transit Riders
By Larry Filler
The American Recovery and Reinvestment Act, signed into law earlier this week, stands to be President Obama’s first major legislative victory and holds a great deal of significance for commuters and all users of mass transit.
In addition to $8.4 billion dollars in funding for transit, $8.4 billion for high-speed rail and $1.3 billion for Amtrak, the economic stimulus package also features a significant change in IRS code 132(f) regarding employer-provided commuter benefits.
Prior to the new law, employees were eligible to set aside up to $120 on a pretax basis to pay for transit and vanpool commuting costs and $230 to pay for work-related parking. Employers could also provide a tax-free subsidy or fringe benefit for the same amount. Thanks to the stimulus package, the transit/vanpool benefit cap has been increased to $230, rectifying an imbalance with parking savings that dates back to the earliest days of commuter benefits.
This change is significant in that it will enable most commuters to pay for their entire commute on a tax-free basis. A commuter spending more than $200 on his or her monthly transit commute can save up to $1,000 per year if he or she enrolls in a commuter benefits program, which will give many families important financial relief. Additionally, this cap increase helps offset the many looming fare increases that commuters have been facing across the nation.
Employers will benefit from this historic change as well; companies offering the benefit could save up to an additional $100 per employee per year in payroll taxes. And according to a recent survey by BusinessWeek Research and TransitCenter, commuter benefits plans are a growing trend among the nation’s corporations:
- 40 percent of employers currently offer a commuter benefits program
- 30 percent of employers said they would offer commuter benefits if the transit cap increased to $200
- 62 percent of employees say they participate in a commuter benefits program
- 53 percent of employees said they would participate if their companies offered it
The new cap increase also promises a significant environmental impact if it has the predicted effect of causing more employees to take advantage of transit commuting by switching from driving to work and using transit more often. According to the same survey, 41 percent of those enrolled in commuter benefits programs increased their use of mass transit, and 46 percent increased their mass transit usage during weekends. In addition, 18 percent of employees who joined the program switched from driving alone to riding mass transit. The American Public Transportation Association reports that switching from driving to riding mass transit reduces CO2 emissions by 4,800 pounds per person per year.
Employees who’d like to find out if their company offers a program should contact their benefits administrator for more information. If their company doesn’t currently offer a program, they should make a request to their benefits administrator to add a program, or contact a company for more information about setting up a commuter benefits program.
Larry Filler is the president and CEO of TransitCenter.
February 20th, 2009 at 2:38 pm
I’m not sure it was really a victory for transit. It was a victory for High Speed Rail and a victory for the status quo but we have a long way to go in this country and the Stimulus fight showed that. There was no operating assistance in the bill at a time when agencies are suffering the most and cutting back heavily. That means jobs are impacted in two ways, at the transit agency and people trying to get to and from work.
February 21st, 2009 at 2:51 pm
This change is really important and before now I don’t believe it had been reported.