News from King County Department of Transportation
Release date:  Aug. 15, 2006

Pre-tax transit passes are like a ‘free’ raise

Metro Transit offering transportation benefits class for employers on Aug. 24

If you take public transit to work, your company can help you save 20 to 40 percent of your fare – and it won’t cost your boss a dime.

Federal law now allows employees to use pre-tax income to purchase monthly public transportation fare (for bus, train, ferry or registered vanpool). If a company chooses to offer this pre-tax commuter benefit to its employees, the company simply deducts the requested amount from employee income to purchase the fare in the form of a pass, ticketbook or voucher.

These benefits are available to employees only through their employers, and companies of every size are eligible. There is no minimum level of employee participation.

Metro staff offers training classes for employers – the next one is Aug. 24 in Seattle (see below) – tool kits to start the program at individual worksites, and assistance in carrying out the program.

“Many companies are jumping at the chance to offer the pre-tax transit pass because it’s like giving their employees a raise at no cost to the business,” said King County Metro Transit General Manager Kevin Desmond.

“We've seen growing interest among employers of all sizes, as gas prices are rising and as employers are understanding that pre-tax benefits for commute fares are easier to administer than flexible spending accounts for medical or childcare expenses,” he said.

The “use-it-or-lose-it” provision of medical pre-tax accounts is not an issue with commuter benefits because employee pre-tax income is spent monthly.

The law allows employees to set aside up to $105 per month in pre-tax income for purchase of a transit pass or ticketbook. Because pre-tax benefits lower an employee’s taxable income, the employee saves federal withholding and FICA payroll taxes on the amount deducted. The employer also saves paying FICA on the amount deducted. Employers can also choose to contribute to the cost of their employees’ public transportation fare and still allow employees to use pre-tax dollars for the employee share.

For more information about all the programs Metro offers for employers, visit the program website.