Starting January 1, 2016, DC employers with 20 or more employees must provide one of three commuter benefit options:
- Option #1: Employee-Paid Pre-Tax Benefit, enabling employees to set aside $130 per month in pre-tax funds for transit or vanpool expenses or $20 per month for bicycling costs;
- Option #2: Employer-Paid Direct Benefit, by which employers pay for transit expenses, vanpool expenses, or bicycling costs;
- Option #3: Employer-Provided Transportation, consisting of vanpools from outside DC or shuttles from Metro stations, park-and-rides, major hubs, or other locations.
This requirement comes from the Sustainable DC Omnibus Amendment Act of 2014. The Employee-Paid Pre-Tax Benefit amounts under Option #1 are the same as the IRS's Qualified Transportation Benefit limit for transit or vanpool expenses and bicycle expenses for 2016. The types of qualified benefits allowed under Option #1 are expressly tied to the Internal Revenue Code provisions for Qualified Transportation Benefits. This means that employers who provide Employee-Paid Pre-Tax Benefits under Option #1 will be in compliance with the IRS rules for Qualified Transportation Benefits. Unlike existing IRS rules, the new DC law does not include a pre-tax qualified parking benefit. (Readers beware: The DC Department of Transportation's "toolkit" on this new law mistakenly includes a parking benefit as part of Option #1. We have notified them of the error, and they will be correcting it in a future version of the document.)
The DC law does not provide for any minimum or maximum benefit amount for the Employer-Paid Direct Benefits under Option #2. To get the benefit of favorable tax treatment under the IRS Qualified Transportation Benefit, employers should limit Option #2 benefits to $130 per month for transit or vanpool expenses and $20 per month for bicycling expenses. Otherwise, employees will be taxed on the excess.
As for Option #3, Employer-Provided Transportation, the IRS does not have a specific corresponding exemption. It would appear, however, that the Employer-Provided Transportation option would fall under the Qualified Transportation Benefit definition of "vanpool," because the new DC law identifies only vanpools and buses as choices for the employer to provide under Option #3. Thus, the employee presumably will not be taxed as long as the benefits per employee are less than the IRS's $130/month vanpool limit discussed above.
To implement this new program, "goDCgo" suggests that, regardless of the option you select, you'll want to survey your employees about their commuting needs and wishes, decide whether to manage the program in-house or through a vendor, create a Commuter Transit Benefits Policy, and communicate the program to your employees. Employees are also encouraged to enroll in the Guaranteed Ride Home program, which provides transportation four times a year when unexpected circumstances create an unusual commuting need.
Some have asked whether a "covered employer" is one with 20 employees working in the District, or 20 employees overall with at least one in the District. Although the law is silent on this, we are informed that the Department of Employment Services, tasked with enforcing the new law, has suggested in a public webinar that the law applies to employers with 20 employees working in the District – which makes sense.
The penalty for noncompliance is a civil fine under the Civil Infractions Act.