Governor Murphy signed a new law on March 1, 2019, read here: Commuter Law, requiring certain employers to provide pre-tax commuter fringe benefits to employees. New Jersey employers with at least 20 employees in the state will need to begin offering those employees pre-tax transportation fringe benefits covering commuter highway vehicle and mass transit costs. The program must be implemented by March 1, 2020, or the effective date of New Jersey Department of Labor and Workforce regulations, whichever occurs first.
The benefit applies to employers and employees covered by New Jersey’s unemployment insurance law. Employers covered by a collective bargaining agreement (CBA) are exempt until any current CBA expires. The mandate doesn’t specify how soon after hire employers must be offered these benefits or impose any notice or posting requirements, but these issues may be addressed in the impending regulations.
The pre-tax commuter benefit must comply with the federal tax code (IRC § 132(f)), which allows employers to offer employees a choice between taxable compensation or nontaxable qualified transportation fringe benefits. Employers must allow covered employees to elect up to the maximum benefit level permitted by federal law ($265 per month in 2019). The mandate applies to travel between a person’s place of residence and place of employment other than in a motor vehicle occupied by one person. Alternative means of commuting include, but are not limited to, public transportation, carpools, van pools, bus pools, ferries, bicycling, telecommuting, and walking.
No Federal Deduction
New Jersey’s law does not allow employers to deduct that expense of the pre-tax commuter benefit from federal corporate income taxes. The federal tax code generally allows a corporate deduction for employee salaries or other compensation, including benefits paid for services. However, Internal Revenue Code Section 274 disallows or limits various employer deductions. The 2017 Tax Cuts and Jobs Act (PL 115-97) eliminated the employer deduction for qualified transportation fringe benefits that are excluded from employees’ taxable income under Section 132(f). The act also requires nonprofit employers to pay unrelated business income taxes on those fringe benefits (IRC § 512(a)(7)). Employers should discuss any New Jersey tax-favored status with their tax advisers.
Employer Next Steps
If a covered employer does not currently offer pre-tax transportation fringe benefits in New Jersey, they will need to do so in the coming year and should keep an eye out for the impending regulations. Check back to Innovative’s website for future updates.
Feedback From Our Happy Customers
The Innovative team is well respected at AFS. My staff and I feel they are an extension of our HR team! Since implementation, they have always remained committed to assisting AFS with all of its healthcare needs; in fact, it doesn’t matter what time of day, they always respond in a timely manner.
Each year they come up with fresh material so our employee’s interest is always peaked. A few years ago, Innovative provided us with documentation to show that moving from a fully insured program to self-insured would be more cost effective for AFS, and it has been! Innovative has truly made our jobs easier so we can focus on other tasks.
As an HR professional, Innovative makes my job easier and benefits administration much less overwhelming than it would otherwise be.
They are truly a partner with me to make sure our team members have the best benefits and service around their benefits that we can offer. Innovative’s team is responsive, professional and resourceful. (They are at the forefront of knowledge in many areas, including ACA reporting and compliance, which can get highly complicated.)
As a client for the last 4 years, we love working with our Innovative Benefit Planning team because of their service model, scope , depth and quality of expertise in handling our benefits and renewals.
Their level of commitment just keeps getting better each year. They have more than met our expectations on renewal negotiations, response time, assistance with ongoing plans, open enrollment material, meetings, support, bill auditing, and wellness programs.
Since our partnership with Innovative Benefit Planning in 2017, it has been a seamless one. Innovative always provide options, suggestions and recommendations when it comes to our benefits renewal.
Innovative is always present even when open enrollment ends, their year round communication reminds me that I can always reach out for help at any time. Their professionalism is the utmost one can expect. My account representative Jenni is wonderful, courteous, knowledgeable and very helpful.
We have been dealing with Innovative Benefit Planning for many, many years. They have given us nothing but exceptional service.
We can pick up the phone or email them and they always resolve our questions and take care of our employees insurance issues in a very timely manner. They negotiate our insurance rates every year and have managed to reduce the increase every year. Every account manager we’ve had throughout the years have been great to work with.
I have been working with Innovative Benefit Planning for over six years. Previous to Innovative, I had used the same broker for about 25 years. I was used to doing everything myself during open enrollment with my previous broker.
When Innovative came on board, I was pleasantly surprised how “on top” of things they were. I never have to call them and bother them about getting rates to me for open enrollment, as they are in touch with our carriers on a regular basis, and they get me my information for open enrollment as soon as they receive it from the carriers.