The APA is urging Congress to address issues with commuter benefits that have been ongoing since 2013. Originally, the limits individuals could set aside on a pretax basis to cover commuting expenses for work for both parking and transit benefits were $130 a month. Commuting costs in many parts of the country, especially urban areas, have risen well above $130 a month. In 2013, Congress tried to address that by raising the limit to $250 a month, however, that raise only applied to parking benefits. Reimbursements for buses, subways, and van pools stayed at $130 a month.
In December 2014, it looked as though the APA had been successful in convincing Congress of the need to apply parity to the two commuter benefits plans. Moving into the final days of 2014 it seemed likely Congress would raise the commuting benefit cap to $250 and extend that for two years through 2016. The deal fell through on the last day. Eventually, Congress did raise the cap; however, it was applied retroactively to January 2014—precisely what the APA had asked Congress to avoid. Now the APA is asking Congress to once again apply parity to the benefits and to apply it equally and permanently.
Retroactive application is one of the most difficult aspects to administer for both employers and the employees using the benefit. Many employees will not have the opportunity to recoup the missed benefits from months past making the retroactive application irrelevant. For those who do have the opportunity, employers need to adjust the employees’ tax withholding, which can be complicated and expensive.
The APA is working within a larger coalition of 52 organizations called Commuter Benefits Work for Us. While the APA’s overriding interest in commuter benefits is to eliminate the administrative burden and uncertainty that comes with having the benefits renewed each year, the coalition as a whole has varied interests in commuter benefits, ranging from the ecological to the economic.
One unintended consequence of not updating the transit limit is the law now offers an incentive to drive to work and park instead of using public transportation. The coalition argues that “Public policy and the tax code should not penalize commuters for using transit and vanpools instead of driving to work. Congress’ failure to permanently extend this important tax policy constitutes an increase in taxes every time they expire, and it sets a policy that fails commuting Americans. In addition, uncertainty in the monthly deduction level for the transit benefit from year-to-year creates administrative burdens that make the program difficult to manage. Finally, instability in this employer benefit directly hurts public transportation systems and municipalities by creating fluctuations in ridership and decreases in the overall demand.”
Congress will reconvene after Labor Day to tackle a host of expiring tax provisions. On the table is a new proposal to extend the commuter benefits into 2016 and cap both parking and transit benefits at $250 per month. That would address the issue for this year and next. If those provisions aren’t extended permanently, however, Congress could be debating this issue again in 2017.
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