New Jersey Senate Bill No. 1567 was signed by the Governor into law on March 1. The law states: “This act shall take effect immediately but shall remain inoperative for 365 days following the date of enactment or upon the effective date of rules and regulations adopted pursuant to Section 5 of this act, whichever occurs first.” That means that the earliest employers will need to comply is March 1, 2020. Per Section 5 of the law, rules need to be adopted in consultation with Transportation Management Associations (TMAs), transit agencies in the state, and third-party transit benefit providers.
This bill requires every employer in New Jersey that employs at least 20 persons, not subject to a collective bargaining agreement, to offer a pre-tax transportation fringe benefit to all of the employer’s employees that are not subject to a collective bargaining agreement. The federal government is only required to provide the benefit to federal employees that are not already eligible for a transit benefit equal to or greater than the pre-tax transportation fringe benefit.
A pre-tax transportation fringe benefit is a benefit that allows an employee to set aside wages on a pre-tax basis, which is then only made available to the employee for the purchase of certain eligible transportation services including transit passes and commuter highway vehicle travel. The employer is not required to offer a qualified parking or bicycle benefit, but may offer those benefits.
The bill also establishes a $100 to $250 penalty for the first time any employer is found to be in violation of this requirement. An employer has 90 days from the date of the violation to offer the pre-tax transportation fringe benefit program before the fine is imposed. After 90 days, each additional 30 day period in which an employer fails to offer a pre-tax transportation fringe benefit is a subsequent violation subject to a $250 penalty. The penalty is to be imposed only once in any 30 day period. The Commissioner of Labor and Workforce Development is authorized to ensure that employers provide the pre-tax transportation fringe benefit if required and issue citations for failure to comply with the requirement.
The bill also requires the New Jersey Transit Corporation to establish a public awareness campaign in conjunction with the New Jersey Turnpike Authority and the South Jersey Transportation Authority. The campaign is to encourage the public to contact employers about pre-tax transportation fringe benefits.
Pre-tax transportation fringe benefits can be offered directly by employers or through third party providers. The federal benefit levels available for 2019 are $265 per month and are subject to cost-of-living adjustments by the federal Internal Revenue Service (IRS) for transit passes and commuter highway vehicle travel. The New Jersey transportation limit will be consistent with the IRS limit established for 2020 and beyond. The transportation fringe benefit is not subject to payroll tax for the employer or the employee, allowing both the employer and employee to reduce their federal tax payments.
Inevitably certain changes and clarifications will be made prior to March 1, 2020, as the State outlines rules and regulations concerning the administration and enforcement requirements of this pre-tax transportation fringe benefit.
WageWorks will keep you up to date on changes as they occur.
The information contained in this article is not intended to be legal, accounting, or other professional advice. We assume no liability whatsoever in connection with its use, nor are these comments directed to specific situations.