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November 12, 2014

New York City Employers Will Be Required to Provide Pre-Tax Mass Transit Benefits

Under federal law, employers may allow employees to utilize pre-tax income for qualified mass transportation benefits, such as train tickets and MetroCards for use on city subways.  On October 20, 2014, New York City Mayor Bill de Blasio signed into law a new provision of the New York City Administrative Code that will require certain New York City employers with 20 or more full-time employees in New York City to provide employees with the federal pre-tax mass transit benefits beginning January 1, 2016 (“Mass Transit Benefits Law” or the “Law”).  For the purposes of the Mass Transit Benefits Law, “full-time” employees are defined as those working an average of 30 or more hours per week. The Mass Transit Benefit Law does not require covered employers to provide other federal transportation benefits, such as the use of pre-tax dollars to pay for commuter parking – only mass transit benefits.  According to the City, covered employers will save more than $100 per year per employee in tax liability.

The Department of Consumer Affairs is tasked with enforcing the Mass Transit Benefits Law.  The Law incentivizes employers to take advantage of an existing federal tax benefit, which already allows businesses to offer its workers $130 a month as pre-tax income for transportation, by imposing civil penalties for covered employers who fail to offer pre-tax transit benefits.  Penalties will not be assessed on violations occurring prior to July 1, 2016.   For violations occurring after July 1, 2016, employers will be subject to a civil penalty of $100 to $250 for a first violation.  Employers will be granted the opportunity to cure the violation within 90 days before the penalty will be imposed.  After the expiration of this cure period, every 30-day period in which the employer fails to offer the required benefit will constitute a subsequent violation, and each subsequent violation will carry an additional $250 civil penalty.  

Generally, employers will not be required to offer a pre-tax transportation program if a collective bargaining agreement exists.  However, where the employer also has more than 20 employees in New York City that are not covered by a collective bargaining agreement, those employees will be entitled to the pre-tax mass transportation benefits.  Additionally, once a covered employer begins to offer employees the opportunity to purchase pre-tax transportation benefits as required by the Mass Transit Benefits Law, employees eligible for the benefit must continue to be provided the opportunity to purchase such benefit for the duration of employment, even if the employer’s number of full-time employees falls below the 20-employee threshold for coverage.
Finally, employers may seek to have the Department of Consumer Affairs waive the requirements of the Mass Transit Benefits Law where the employer can demonstrate that the offering of such benefit would be a financial hardship for the employer. 

Employers with 20 or more full-time employees in New York City should begin planning to provide the pre-tax mass transit benefits.  We will keep you apprised of all developments with respect to the Mass Transit Benefits Law, and will be available to assist you in administering the benefits.