New Philadelphia Commuter Benefit Program to Begin in 2023 | Risk Strategies

Philadelphia recently joined the ranks of other U.S. cities¹ requiring certain employers to offer a commuter transit benefit to employees, starting in 2023 (“Commuter Benefit Program”).

On June 9, 2022, the Philadelphia City Council passed the Commuter Benefit Program ordinance, which was subsequently signed by the Mayor. The Commuter Benefit Program will be effective on December 31, 2022 and commuters will be eligible for the benefit beginning on January 1, 2023.

Covered Employer

Covered employers under the Commuter Benefit Program include all employers that employ 50 or more covered employees (see definition below) except for government employers.

Covered Employee

An employee is covered under the Commuter Benefit Program if they performed an average of at least 30 hours of work per week for compensation within the geographic boundaries of Philadelphia for the same employer within the previous 12 months.

Philadelphia Commuter Benefit Program Details

All covered employers are required to make available to all its covered employees at least one of the following commuter transit benefits:

1. An election of a pre-tax payroll deduction for:
   • Qualified mass transit benefits including expenses incurred for:
     • A fare instrument (including a transit pass, token or fare card) or
     • Transportation in a commuter highway vehicle²
   • Qualified bicycle expenses³ (including reasonable expenses related to the purchase, maintenance, repair and storage of bicycles regularly used for commuting to and from work)
2. An employer-paid benefit under which the employer provides a fare instrument for a covered employee's mass transit expense⁴;
3. Any combination of the two benefit options described above.

The Commuter Benefit Program ordinance requires benefit levels at least equal to the maximum amount that may be deducted for such qualified transportation benefits pursuant to Internal Revenue Code § 132⁵.

Enforcement

Covered employees can report a violation of the Commuter Benefit Program ordinance by their employer to the designated city enforcement agency. Upon receipt of an alleged violation, the designated agency will investigate the employer and mediate the complaint within 30 days. If the agency determines an employer to be in violation of the ordinance, a written warning will be issued, directing the employer to comply or face penalties.

Employers who remain out of compliance with the ordinance following 30 days after the written warning is issued may face penalties of up to $300 per day.

Next Steps for Covered Employers

Covered employers are advised to review their current employee commuter transit benefit program to ensure full compliance with the Commuter Benefit Program ordinance by January 1, 2023.

For those covered employers without a current commuter transit benefit program in place, reach out to your Risk Strategies account team for assistance with implementing a compliant program for 2023.

¹ Including Berkeley, CA, Los Angeles, New York City, Richmond, CA, Seattle, San Francisco Bay Area, Washington, D.C., as well as the state of New Jersey.

² To qualify as a commuter highway vehicle, a vehicle must have seating capacity for at least six adults (not including the driver) and at least 80% of the vehicle mileage must be used for transporting employees between their homes and workplace with employees occupying at least one-half the vehicle's seats (not including the driver's).

³ Tax-related legislation passed in 2017 suspended the exclusion of qualified bicycle commuting reimbursements from an employee's income for tax years beginning after 2017 and before 2026. Employees who receive payment for qualified bicycle commuting expenses will not be eligible for the tax exclusion during that time period. Employers are advised to reach out to their tax advisers about deducting these reimbursements as a business expense during that time period.

⁴ In accordance with Internal Revenue Code § 132(f)(2).

⁵ For 2022, the maximum monthly amount is $280 for qualified transportation expenses.