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New York City Amends Mass Transit Benefit Rules

New York City (NYC) enacted Local Law 2014/053 to require employers with 20 or more full-time employees in the city of New York to offer their employers the use of pre-tax earnings to purchase qualified transportation benefits. See our Compliance Alert New York City Transit Ordinance Guarantees Pre-Tax Transit Benefits.

Local Law 2014/053, recently amended by the addition of a new chapter 8, adopts rules clarifying the law and provides the following guidance.

  • Clarifies the definition of full-time employee;
  • Requires that employers maintain certain documentation demonstrating compliance with the law;
  • Establishes how business size is calculated to determine whether a business is covered under the law;
  • Clarifies how the law applies to temporary help firms;
  • Permits employers to offer certain transportation benefits at the employers’ expense in lieu of offering employees the opportunity to use pre-tax earnings to purchase qualified transportation fringe benefits.

Recordkeeping Requirements
The guidance also clarifies that the employer must retain records for two years sufficient to demonstrate that:

  1. Each eligible employee was offered the opportunity to purchase transit benefits on a pretax basis, and either accepted or declined the offer, or 
  2. Employers provide, at their own expense, a transit pass or similar form of payment for transportation on public or privately owned mass transit or in a commuter highway vehicle at the maximum pre-tax level permitted under federal law for transit expenses.

If employers satisfy the requirements using the method outlined in #2 above, they do not have to produce all the other paperwork to demonstrate compliance with the law.

To assist with the record keeping requirement and provide information about the plan, NYC makes available an employer compliance form to gather records of employees’ acceptance or refusal of participation in the commuter benefits program.

Penalties
Under the amended law, employers will be assessed $250 for each of the first, subsequent and any recidivist (new) violations. To avoid penalties, employers must demonstrate they offered their full-time employees the opportunity to purchase qualified commuting expenses with pre-tax dollars. 

The monthly IRS limit for qualified transportation fringe benefits is $255 in 2016 for transit passes and vanpooling expenses, combined, or $20 for qualified bicycle expenses. The limits are indexed and may increase in 2017. The monthly IRS limit for qualified parking expenses is $255 in 2016, and is also an indexed amount, which may increase in 2017. Parking benefits are not required by local law 2014/053; however, qualified parking may be used in addition to the other benefits.

The ordinance was effective January 1, 2016 for covered employers; however, they were not subject to civil penalties for violations that occurred before July 1, 2016. Covered employers need to review the NYC transit program to ensure compliance with all NYC transit requirements.