Transportation Plans

Section 132 of the Internal Revenue Code allows tax savings for employers and employees on certain transportation and parking costs. Section 132 plans are one of the few employee benefits that offer advantages to both employers and employees.

The eFlexTransit account is a transportation plan that's perfect for employees who use mass transit and/or pay for parking. With this plan, employees set aside transit and parking costs on a pre-tax basis. Just like a standard Flexible Spending Account (FSA), the Transit account lowers the employees' monthly taxable income and subsequently the employer's monthly payroll tax.

Transportation plans don't have the same "use it or lose it" rules that apply to FSAs. The employer may choose to have any funds remaining at the end of the plan year roll over into the next plan year or to forfeit the remaining funds. Monthly adjustments, terminations, and elections are allowed in Transportation accounts. The ability to make adjustments month-by-month is very helpful to employees dealing with changes in spending or life events.

Employer Advantages

• FICA tax savings of 7.65% on every dollar the employee puts in the plan
• Flexibility in budgeting for and controlling escalating benefit costs
• Flexibility in benefit choices
• Employee morale
• Competitive benefit plan that helps to attract and retain employees

Employee Advantages

Federal income tax and social security (FICA) tax are not imposed on amounts set aside for qualified transportation expenses. Employees may also avoid state and local income taxes while participating in the eFlexTransit account. The federal tax savings for employees may be as high as 30%. Other employee advantages include:

• Choice in selecting benefits
• Morale booster
• Use of pre-tax dollars to pay for transportation and/or parking expenses that they're already paying for out-of-pocket
• Increased take-home pay due to ability to spend pre-tax dollars

Employer's Responsibility/Legal Requirements

• Plan Document: Employer completes our Adoption Agreement that defines the plan parameters.
• Plan Year. Plans run month-to-month. eFlex will renew the plan annually.
• The IRS guidelines require that the plan is installed to benefit employees, not exclusively for highly-compensated officers or owners.

Qualified Expenses

Expenses that are eligible for reimbursement under the Transit account include:

• Parking your vehicle in a facility at or near your place of employment
• Parking at a location from where you commute, i.e., a train station
• Transit passes to and from work, including the cost of tokens, passes, fare cards, vouchers, etc.
• Mass transit public systems (details below)
• Transportation provided by a qualified private transportation Company

Mass Transit Expenses Eligibility

The mass transit can be a public system, or a private enterprise provided by a company or individual who is in the business of transporting people in a "commuter highway vehicle." Such a vehicle must have a seating capacity for six or more adults (not including the driver), and at least 80% of the of the vehicles' mileage must be from transporting employees to and from their place of work. Additionally, the vehicle must be carrying at least three passengers (not including the driver). Commuter highway vehicles may be owned or leased by an employer to be used by employees or a third-party provider for transportation purposes. Employees may also own and operate commuter highway vehicles.