CLIENT UPDATE

Putney, Twombly, Hall & Hirson LLP
521 Fifth Avenue
New York, NY 10175
Tel: (212) 682-0020

 

October 6, 2015

NYC to Require Most Private Employers to Offer Pre-Tax Transit Benefits

Effective January 1, 2016, the New York City Affordable Transit Act (the “Act”) will require most employers in New York City to offer full-time employees the opportunity to use pre-tax earnings to purchase qualified transportation fringe benefits.

The Affordable Transit Act applies to most employers with 20 or more full-time employees who work for the employer in New York City.  This includes employees who commute from suburbs to work in any of the five New York City boroughs.  In order to determine coverage and eligibility under the new law, the Act defines “full-time employees” as those who work on average 30 or more hours per week for the employer in New York City.  Notably, even if a covered employer’s full-time work force is reduced to fewer than 20, any eligible employee for the pre-tax benefits prior to the employee reduction must continue to be provided the pre-tax opportunity while employed with the employer. 

The Act exempts certain employers from coverage, namely: (1) government employers; (2) employers that are not required by law to pay federal, state, and city payroll taxes; and (3) employers that are party to a collective bargaining agreement, except where the number of full-time employees not covered by the collective bargaining agreement is 20 or more, in which case those full-time employees not covered by the collective bargaining agreement must be eligible for the benefit.  In addition, an employer may avoid the duty to provide the benefit by demonstrating to the Department of Consumer Affairs (the agency charged with enforcing the Act) that offering qualified transportation benefits would cause financial hardship.

Although the Affordable Transit Act will go into effect January 1, 2016, the Act provides both a six-month grace period (i.e., until July 1, 2016) and a 90-day cure period following a first violation before civil penalties may be imposed.  The civil penalty for a first violation will range from $100 to $250.  After the expiration of the 90-day cure period, an employer who has failed to comply will be charged with a subsequent violation, for which an additional $250 penalty will be assessed every 30 days until compliance is complete. 

Takeaway for Employers

New York City employers that are subject to the Affordable Transit Act should determine whether current employee benefit programs offer full-time employees the opportunity to use pre-tax earnings to purchase qualified transportation fringe benefits in accordance with federal law.  If that opportunity is not offered, employers should amend or establish such a benefit plan or program to take effect January 1, 2016, ensuring that all employees who work an average of 30 hours or more per week in New York City are eligible for the benefits.

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If you have any questions regarding New York City’s Affordable Transit Act, please do not hesitate to contact us.