Bankrate's 2009 Tax Guide
Added tax breaks for commuters

The increase in the benefit maximum is due to a new provision in the American Recovery and Reinvestment Act of 2009, better known as the Obama stimulus plan, which was signed into law on Feb. 17. On March 1, the mass transit account limit will be the same -- $230 a month -- as the parking account. This larger commuter account limit will be in effect through 2010 with an inflation adjustment.

Previously, workers were allowed to put more money into the parking account, which some mass transit advocates saw as giving an edge to drivers. The change evens the playing field for all commuters.

Many companies establish the accounts so they can provide the transit passes or vouchers directly to employees or give them a debit card to use toward eligible fares. Cash reimbursement is allowed if the reimbursement is for a mass transit fare that is not readily available for direct distribution to employees.

Account limits, advantages
The funds, however, cannot be commingled. The accounts and the contributions to them must be kept separate.

You can't transfer money between accounts or use excess money in one to pay costs that are attributable to the other.

The accounts do have one advantage over other similar workplace spending plans. At the end of the benefit year, any money still in a transportation account, either parking or mass transit, can be rolled into next year's account.

Also differentiating commuter savings plans from other more commonly offered workplace benefits is their place in the tax code.

Internal Revenue Code Section 132 deals with transportation benefits, while workplace cafeteria plan benefits (health care, flexible spending accounts, etc.) are governed by Section 125. That's why your employer may offer many typical benefits but not transportation accounts.

If a commuter benefit is offered, it has a separate enrollment procedure. Some companies that handle workplace benefits for employers, however, often help coordinate all the firms' employee benefits.

Gasoline, environmental concerns
The commuter account concept started in 1987 with the creation of TransitCenter, a nonprofit organization that promotes mass transit use via transit benefits. Its founder, president and CEO Larry Filler, says that there is growing interest in commuting alternatives.

Because of the cost of gasoline, more workers are looking at mass transit. Environmental issues also are a consideration. "There's a real connection between using [mass] transit and reducing greenhouse gasses," says Filler.

The mass transit component, however, works better in some areas than others.

"[Mass] transit availability is not uniform across the country," says Filler. "So this typically tends to be of greater appeal to metropolitan areas where employees have numerous alternative transportation options."

The Halo Group, a brand development agency, and Clarendon Insurance Group are prototypical companies that provide the transit benefits to their employees. Both are in Manhattan.

Denise Goodwin Pace, co-founder and chief communications officer of The Halo Group, says the firm began offering transit benefits three years ago when it moved to the city. "We wanted to keep our employees happy," says Pace. "It pays off for the company in low turnover, and it obviously keeps our workers happy because it helps pay for commuting costs and is a tax benefit for them."


Robert Daniele, controller at The Halo Group, says 29 of the company's 30 employees use the benefit, which is provided through TransitCenter's TransitChek vouchers, metro cards and debit cards. "The one who doesn't use it walks to work," says Daniele.

All of the employees at Clarendon Insurance Group's New York City headquarters make use of the company's transit account option. It's mandatory, says Helga Selke-Dunn, senior vice president and chief administrative officer.

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