Millions of American commuters are facing a stark reality on January 1, 2012, as their transit fares will effectively increase even though their transit agency or vanpool will not actually be raising fares. These commuters have been taking advantage of a Federal tax law that allows employees to reduce their pre-tax income and apply the savings to their commute. In February of 2009, the transit benefit pre-tax “cap” was increased as part of the American Recovery and Reinvestment Act (ARRA) to $230 per month, matching the amount allowed for parking expenses. Unless Congress acts, to either extend or make the $230 benefit cap permanent, the transit benefit will revert back to $125 per month, the level it was prior to the ARRA increase.
Commuter Benefits, born from the Clean Air Act of 1990, is part of a federally-enabled program governed by section tax code 132(f) of the tax code. The net result of this benefit is a reduction in commuting costs for employees and payroll taxes for employers; a less-stressed, more productive workforce; less congested highways, cleaner air and a demonstrated commitment to the triple bottom line (people, planet and profit).
The monetary savings to the commuter are significant. A relatively low cost benefit, the average payroll tax savings of 8% far outweighs any costs associated with offering and administering the benefit. Employees see a tremendous savings in commuting costs, on the order of 40%, because they are using pre-tax dollars to pay for their commute.
Over the past four years, employers participating in Edenred’s programs achieved tax savings of $75 million. Commuter benefit industry-wide employer savings are estimated to be just shy of $275 million. Our surveys show that businesses use the savings to hire new employees, invest in research and development, or increase your marketing. As a pre-tax benefit, both employers and employees alike see significant savings.
Furthermore, over the same time span employees participating in Edenred programs achieved nearly $400 million in pre-tax savings. At the same time, the commuter benefit industry estimates $1.2 billion in employee pre-tax savings.
There are also noteworthy environmental savings. In 2010, thanks to greener commute, Edenred customers saved:
- The CO2 emissions from 947,650 barrels of oil consumed
- The CO2 emissions from the electricity use of 49,453 homes for one year
With about 8% of people using public transportation to commute to and from work, participating in pre-tax commuter benefits it has saved the Earth nearly 2 billion pounds of CO2. This is equivalent to the CO2 emissions from the electricity use of 110,095 homes for one year. Public transportation’s overall effects save the United States 4.2 billion gallons of gasoline annually – more than 3 times the amount of gasoline imported from Kuwait.
Edenred has joined the Commuter Benefits Works for Us Coalition to rally support and allow commuters and their employers to voice their opinion to their elected officials. The Coalition consists of other transit benefit providers, as well as transit and vanpool providers, employers associations and others to protect the transit portion of the commuter benefit. Visit www.CommuterBenefitsWorkforUs.com to learn more and let your voice be heard.