Effective Jan. 1, 2016, the New York City Affordable Transit Act (the “Act”) will require covered employers to establish a program allowing full-time employees to designate up to the federal limit of $130 per month in pre-tax income for their qualified transportation needs.
Section 132(f) of the federal Internal Revenue Code excludes “qualified transportation fringe benefits” from an employee’s gross income. Qualified transportation fringe benefits include transit passes (such as MTA cards or ferry tickets), qualified parking, and the cost of transportation in a commuter vehicle between the employee’s home and worksite. Although federal law merely allows employers to offer employees this benefit, the Act now requires covered New York City employers to do so.
The Act will cover most employers with 20 or more full-time employees who work in New York City. A full-time employee, as defined by the Act, is one who works for an employer in New York City for an average of at least 30 hours per week.
Exempt from the Act are: (1) government employers; (2) employers that are not required by law to pay federal, state, and New York City payroll taxes; and (3) employers that are party to a collective bargaining agreement, except where the number of full-time employees not covered by a collective bargaining agreement totals at least 20, in which case those employees not covered by a collective bargaining agreement must be eligible for the benefit. Separately, even if an employer is unable to claim one of the above exemptions, it may avoid the Act’s requirement to provide the benefit if it can demonstrate to the City’s Department of Consumer Affairs (“DCA”) that offering the federal commuter tax fringe benefit to employees would cause financial hardship.
Although the Act goes into effect on Jan. 1, employers will be afforded a six-month grace period to comply with its provisions—meaning employers will not face penalties for non-compliance before July 1, 2016. Also, following a first violation, employers will be granted a 90-day cure period to rectify their noncompliance with the Act before being assessed a civil fine. The civil penalty for a first violation left uncured within 90 days can range from $100 to $250. Following the expiration of the 90-day cure period upon a finding of a first violation, the DCA will deem every 30-day period in which the employer fails to offer the benefit to constitute an additional violation of the Act, which will be subject to a civil penalty of $250. Penalties will be limited to no more than one per every 30-day period.
Employers should contact their Davis Wright Tremaine LLP attorney, or one of the authors, to review whether they are covered by the Act, and if so, what they may do to comply with its requirements.