What Does the NYC Transit Law Mean To Me?
The New York City Council passed Int. No. 295-A, which will require that entities with twenty or more full-time employees offer qualified commuter benefits to their employees. The council voted 49-0 in favor of the bill. On October 20, 2014, Mayor Bill de Blasio signed the bill into law. Key Provisions of the law:
- Entities with twenty or more full-time employees must offer qualified transit benefits, such as a Commuter Benefits Plan from Benefit Resource, on a pre-tax basis to their employees. A full-time employee will be defined as any employee who works an average of 30 or more hours per week.
- The Department of Consumer Affairs (DCA) will be responsible for the enforcement of the law.
- Penalties for non-compliance will not apply until July 1, 2016. Upon first violation, a civil penalty of $100 to $250 will be assessed. First time violators will have 90 days to cure a violation before they become liable for the initial penalty. Each 30-day period in which an employer continues to fail to offer transit benefits would constitute a subsequent violation and would be liable for an additional civil penalty of $250.
- Certain entities are exempt from the law. Exemptions exist for government entities, entities/employees under a collective bargaining agreement and entities not required to pay federal, State or New York City payroll taxes.
The Financial Impact of the Law
Pre-tax mass transit benefits are a great opportunity for employees and employers to save. Assuming an average individual tax liability of 30% and the cost of a monthly metro pass at $116.50, the typical employee can expect to save $419 per year. In a Wall Street Journal article, John Raskin, executive director of the Riders Alliance, estimated as many as 450,000 New Yorkers will have access to more affordable transit due to the passage of this law. At these figures, New Yorkers collectively will receive a $181 million raise. Additionally, employers are set to save 7.65% in FICA obligations. After administrative fees are paid, employers can expect a new overall savings of $40 or greater per employee per year. This generates an estimated $19 million increase in cash flow for New York businesses to invest in their companies and staff.
Tax Savings Projections For New York
|Per Employee||Benefit to New Yorkers|
|Monthly Metro Pass||$116.50/mo. or $1,398/yr.|
|Individual Tax Rate||30%|
|Annual Employee Tax Savings||$419||$188.55 Million|
|Employer FICA Tax Rate||7.65%|
|Annual Employer FICA Savings||$107|
|Less Typical Administrative Fees||$60|
|Net Annual Employer Savings||$47||$21.15 Million|