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Legal Requirement for Bay Area Commuter Benefits Program Goes Into Effect

July 28, 2014 by

Employers and employees as well as the San Francisco Bay air quality are likely to benefit from the upcoming implementation of this new employment benefit. In an effort to improve air quality, reduce emissions of greenhouse gases and other air pollutants, and to decrease traffic congestion in the San Francisco Bay Area, a new regional rule will require many Bay Area employers to provide their employees with a commuter fringe benefit starting September 30, 2014.  The rule, known as the Bay Area Commuter Benefits Program, is a pilot program implemented by the Metropolitan Transportation Commission (MTC) and the Bay Area Air Quality Management District (Air District), and is modelled after local ordinances already adopted by several Bay Area cities.  The program will be in effect until at least December 2016 and could be extended longer depending on the results of the program.  The new rule applies to all public, private, and non-profit employers that employ an average of 50 or more full-time employees within nine Bay Area counties –Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, and Santa Clara, as well as the western portion of Solano County and the southern portion of Sonoma County. Beeson, Tayer and Bodine’s (BT&B) Sacramento and Oakland employment law practice provides the background and legal requirements for this new regional rule.

A recent study found that the Bay Area freeway system is congested 79 percent of the time on average during peak travel periods.  Traffic congestion increases emissions of air pollutants and greenhouse gases, and also imposes significant economic costs on the region.  Currently, two-thirds of Bay Area employees drive to work alone, which is a major cause of peak period traffic congestion.  The purpose of the new program is to encourage employees to commute to work by alternative means such as bus, rail, ferry, vanpool, carpool, bicycles, or walking.

Although there is no obligation for an employee to change his or her method of commuting to work, employers covered by the rule are required to offer their employees who work at least 20 hours per week one of four commuter benefit options:

  1. ‘Pre-tax option’ – Covered employees can exclude from taxable wages the costs incurred for transit passes or vanpool charges, up to the maximum amount allowed by federal tax law (currently $130 per month).  Under this option, the employee saves on federal and state income taxes and FICA taxes, and the employer saves on its portion of FICA taxes.
  2. ‘Employer-paid benefit’ – An employer provided subsidy equal to the monthly cost of commuting via transit or by vanpool, or seventy-five dollars ($75), whichever is less.  Again, up to $130 per month of the employer paid subsidy is tax-free to the employee, and the employer does not pay FICA taxes on the subsidy.
  3. ‘Employer-provided transit’ – Commuter transportation in the form of a bus, shuttle, or vanpool service that is offered by the employer at little or no cost to the employee.
  4. ‘Alternative benefit’ – The employer has the option of offering an alternative commute benefit such as a subsidy for bicycling, carpooling, or walking, as long as it is as effective in reducing solo vehicle commutes as the three other options and is first approved by the Air District.

Seasonal or temporary employees as well as field employees that do not report to a home office are excluded from coverage, but employers may still chose to offer the benefit to these employees.

It is anticipated that most employers will elect to offer the first of the four options, a pre-tax exclusion, because it is the least expensive option to implement and may end up saving employers money.  A study done by BAE Urban Economics projects that the overall estimated direct and indirect economic impacts from the new rule will be positive, totaling approximately $21 million in 2015.  In fact, many large employers already offer benefits that are consistent with one of the four benefit options required through this new law.

 It is important to note that covered employers are required to notify all covered employees that they are covered by the program.  If you do not currently receive a commuter benefit, and work for a covered employer, look out for a notice from your employer in the near future.  The notice requirements are as follows.

  • The benefit options the employer has selected to offer
  • Instructions on how to obtain the benefit
  • Contact information for the employer’s commuter benefit coordinator

This information must also be provided to new employees when they start and to all employees on an annual basis.  Any covered employer that fails to comply with the rule or its notice requirements could be subject to civil penalties under California’s air pollution control laws.  If you do not receive notification about the benefit or believe that the company you work for is not fully implementing the requirements, contact us at BT&B and we can advise you or your union officials of the steps needed to uphold this and other employment law benefits regulation.  Follow other rulings and legislature on labor and employment law @BTBLegal

The material on this website is provided by Beeson, Tayer & Bodine for informational purposes only and does not constitute legal advice. Readers should consult with their own legal counsel before acting on any of the information presented. Some of the articles are updated periodically, and are marked with the date of the last update. Again, readers should consult with their own legal counsel for the most current information and to obtain professional advice before acting on any of the information presented.