Based on current legislation, your company can offer transit benefits in the form of a pre-tax, employee-paid payroll deduction. Since transit benefits are considered tax-free benefits, not employee wages, your company can save an average of 7.65% in payroll taxes.
More and more employers are taking advantage of transit benefits each day. Section 132(f) of the federal tax law allows for employees to have money deducted pre-tax (up to the monthly limit) from their paycheck to pay for their transit fares. By deducting these pre-tax, employees can save up to 40% through reduced taxes paid. The employer saves as well though reduced payroll taxes as well. Typically up to 10% of the employee’s deduction. Basically, when your employees save, your organization saves. Below is an example of how an organization can save with just one employee using transit benefits.
| Payroll taxes paid without pre-tax Benefit1 | ||
|---|---|---|
| Monthly Gross Salary | $4,000 | |
| Transit Fare | n/a | |
| Pre-Tax Income | n/a | |
| FICA | ($ 306) | |
| Unemployment Tax | ($ 32) | |
| Payroll Taxes Paid | ($ 338) | |
| Payroll taxes paid with pre-tax Benefit1 | ||
|---|---|---|
| Monthly Gross Salary | $4,000 | |
| Transit Fare2 | ($ 300) | |
| Pre-Tax Income | $3,720 | |
| FICA | ($ 283) | |
| Unemployment Tax | ($ 30) | |
| Payroll Taxes Paid | ($ 313) | |
Savings of $25 each month | $25 x 12 months = $300 in Annual Savings
1. Assumes 7.65% FICA and 0.8% FUTA.
2. Assumes employee deducts the maximum each month.
What will my employees be using?
View the Product Choices available to your employees.
How the program works
Because everything is done online, enrollment is easy and administration is simple. Monthly ordering allows employees to make changes if their transit needs change. Because payroll deductions and other administrative processes are determined by employers to suit their business needs, it is recommended that you speak with an RTA representative to discuss your options. Employers can contact the RTA and a representative will be in touch.