On October 20, 2014, New York City Mayor Bill de Blasio signed Local Law 53, the Affordable Transit Act. Under this new law, New York City businesses with 20 or more full-time employees will be required to offer a federal commuter tax fringe benefit to employees. Covered employers will need to establish a program enabling employees to set aside pre-tax income, up to the IRS limit of $130 per month for transit, to pay for their public transportation costs. This law is modeled after the voluntary federal statutory scheme established within the IRS Code.
There will be administrative costs to establishing the required commuter benefit programs as well as savings for employers and employees. Employers currently in compliance with the federal guidelines generally offer prepaid debit cards, vouchers or transit passes directly to enrolled employees. Some mid-size to large companies have contracted with third-party administrators to handle enrollments and compliance. At the same time, advocates have stated that businesses can save up to $103 a year in tax liabilities for each participating employee, and riders can save $443 per year if they purchase unlimited monthly MetroCards. For every dollar an employee spends on pre-tax transit benefits, an employer can save up to 7.65¢ in avoided federal payroll tax.
The NYC Department of Consumer Affairs will enforce this law, and DCA Commissioner Julie Menin has been directed to promulgate additional rules. Employers found in violation will be assessed a civil penalty of $100 to $250 for violations. The law has an exemption for employers with collective bargaining agreements, and the department may waive the requirements in cases of financial hardship.
The Affordable Transit Act will go into effect on January 1, 2016, and employers will have a six-month grace period to comply with the law, as penalties will not be assessed until July 1, 2016.