United Benefit Advisors Insight and Analysis Blog

The Transit Parity Roller Coaster

By Josie Martinez, Senior Partner and General Counsel at EBS Capstone
a UBA Partner Firm

  Dec 2, 2013 12:51:00 PM

transit benefit parityBy Josie Martinez, Senior Partner and Legal Counsel 
EBS Capstone, A UBA Partner Firm

In the words of Yogi Berra, it’s like déjà vu all over again: Here we are, again almost at the end of the calendar year, and we still do not know where things stand with transit benefit parity. Will transit parity ever be permanent? Possibly, but for now it remains an open question whether transit parity will extend into 2014. Once again, employers are wondering how to handle the transit/parking limit issue and await guidance for next year and beyond.

Just to recap, in February 2009, Congress amended Code §132(f)(2) to make the aggregate monthly limit for transit passes and vanpooling the same as the inflation-adjusted monthly limit for parking beginning in March 2009. This parity rule for transit passes and vanpooling was set to expire at the end of 2010, but it was extended for one year. Then, transit parity was allowed to expire after 2011, but in early 2013, it was restored retroactively for 2012 and extended until the end of 2013 (a logistical nightmare for many employers). Now we are faced with the same issue: Unless Congress once again extends transit parity or makes it permanent, transit parity will expire at the end of 2013 and the combined limit for transit passes and vanpooling expenses will return to a lower inflation-adjusted amount for 2014.

Employers are getting increasingly frustrated with the up and down cycle of this benefit, which may be the catalyst for a bill currently in the works that would make transit parity permanent (as well as include bike-share as a form of transit). The proposed amount is $220.

According to the backers of the bill, on Jan. 1, 2014, almost 3 million of America’s commuters will face a tax increase unless Congress acts. For many families, transportation is the second largest household expense, and currently Congress provides a tax credit to commuters to help reduce parking and transit costs. However, without congressional action, on Jan. 2, 2014, the cost for those who use the transit benefit will practically double. While the parking benefit will remain at $245 a year, the transit benefit will drop to $125, leaving families and commuters with up to $1,440 a year in additional post-tax expense.

Hardly seems fair, does it? Shouldn’t we be encouraging and incentivizing the use of publictransportation, especially in light of increasing environmental costs? The transit parity benefit saves consumers real money, allows business to continue to enjoy a tax break and decreases congestion on overcrowded roads – a win-win across the board. Stay tuned…

Topics: transit benefit parity, UBA, employee benefits, hr consulting, HR compliance, UBA Partner Firms