All Aboard! Illinois Employers Required to Catch a Train or Bus
- Oct 10, 2023
Beginning January 1, 2024, many employers with at least 50 employees in the Chicago area, including all of Cook County and 37 surrounding townships) must provide their full-time employees with pretax public transit benefits. Illinois Transportation Benefits Program Act HB 2068 (the “Program”) adds Illinois to the list of locales mandating employee transportation benefits. Other areas include the San Francisco Bay Area, Los Angeles, Washington DC, Seattle, New York City, and the state of New Jersey.
The Program applies to the following:
- An employer, whether for-profit or not-for-profit, with 50 or more covered employees located at an address in the geographic area specified and located within one mile of fixed route transit service.
- A covered employee means any person who performs on average at least 35 hours of work per week for compensation on a full-time basis, whether employed directly or indirectly.
- The benefit must be made available to all full-time employees beginning on the first full pay period after 120 days of employment.
- The Regional Transit Authority (“RTA”) will make publicly available a searchable map of addresses that are located within one mile of fixed route transit service.
- The geographic areas specified include Cook County and 37 surrounding townships.
- Note: The Program may be waived as a part of collective bargaining.
The transit benefit must comply with federal rules for qualified transportation fringe benefits (“QTFB”). Specifically, the transit benefit must satisfy the requirements and limitations contained in Internal Revenue Code §132(f). This includes the monthly maximum election amount of $300 for 2023 (adjusted annually by the IRS), whether funded by employer contributions or employee salary reduction contributions. The Program does not require employer contributions, only the availability of employee pretax contributions. The federal law also allows employers to provide reimbursement benefits for vanpooling and parking expenses.
Fortunately, employers do not have to reinvent the wheel to implement a QTFB program. Both the RTA and the Chicago Transit Authority (“CTA”) already have fully compliant programs available to employers at no cost on their websites.
While the Program provides benefits to the employees, it adds a tax burden on for-profit employers. The Tax Cuts and Jobs Act (“TCJA”) eliminated the deduction for expenses related to QTFBs. However, there are other advantages for both employer and employee: these commuter benefits are intended to encourage the use of alternatives to driving alone to work to reduce congestion, reduce emissions, and improve accessibility to businesses. A tax burden, but an environmental and accessibility win.
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Stephen Mehaffey is an Associate Director in the firm’s Tax Services Group and has over 25 years of accounting experience.
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