Payroll, Here Are Your Articles for Wednesday, April 13, 2022
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Reorienting Commuter Benefits To the Hybrid Workforce

 

In a hybrid work arrangement, employees work partially from a remote location and partially from the employer’s place of business. The employee gets to enjoy the convenience of remote work and the social interactions of on-site work. Because hybrid employees must travel to and from work in some capacity, commuter benefits are often a consideration. 

Employer-sponsored commuter benefits enable employees to put aside pretax money to pay for qualified work-related transportation costs — such as mass transit, ridesharing, and parking expenses.

As the employer, you’ll deduct the employee’s contribution from their wages on a pretax basis, which results in tax savings for the employee. The contributions are placed in a designated commuter benefits account. The Internal Revenue Code limits the monthly commuter benefits amount that can be deducted pretax from employees’ wages. 

Implications of commuter benefits for employers with a hybrid workforce

  • If an employee shifts fully to remote work, they likely no longer need the commuter benefits they had signed up for. 
  • If an employee shifts to hybrid work, they may or may not need their commuter benefits. For example, if they now travel to the office a lot less frequently, such as once every two or three months, it might not be worth it for them to keep their commuter benefits. If they choose to continue the benefits, they may want to lower their payroll deduction amount. 
  • Unused commuter funds can be carried over into the next year’s plan as long as the employee continues to participate in the plan. However, you cannot refund unused commuter funds to the employee. This means that a hybrid employee who stops their commuter benefits will lose their unused funds. 
  • Some local governments — including those of Seattle and New York City — have mandated commuter benefits. Applicable employers in these regions must offer pretax commuter benefits no matter what. 

Timely communication is key

Hybrid employees might not be aware of the implications of commuter benefits, or they might have heard about the implications in passing but not remember the details or what their options are. Therefore, it’s important that you either inform them or remind them about the specifics, including any impacts, all in a timely manner. This will help them make informed, timely decisions regarding their work-related travel. 

Additionally, let employees know that they do not need to experience a qualifying event in order to modify their commuter benefits contribution. They can change their contribution amount at any time. 

Should you offer commuter benefits to hybrid employees?

The answer to this question comes down to the scope of your distributed workforce, the overall or predicted program utilization rate, and any legal requirements applicable to the situation. You may decide to offer commuter benefits to your hybrid team or eliminate them altogether depending on the specifics of these factors. 

If you provide commuter benefits, make sure that employees who must travel to and from work are aware of the program as well as the options available to them.

 
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Our firm provides the information in this e-newsletter for general guidance only, and does not constitute the provision of legal advice, tax advice, accounting services, investment advice, or professional consulting of any kind. The information provided herein should not be used as a substitute for consultation with professional tax, accounting, legal, or other competent advisers. Before making any decision or taking any action, you should consult a professional adviser who has been provided with all pertinent facts relevant to your particular situation. The information is provided "as is," with no assurance or guarantee of completeness, accuracy, or timeliness of the information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
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