Effective January 1, 2016, most New York City employers with 20 or more full-time employees will be required by law to offer those employees the opportunity to use pre-tax earnings to purchase qualified transportation fringe benefits, other than parking. Essentially, the new law – dubbed the Affordable Transit Act (the Act) – requires employers to take advantage of the Internal Revenue Code’s qualified transportation fringe benefits provisions by allowing employees to pay for certain commuter expenses with pre-tax dollars.
The Act defines “full-time employees” as any employees who work an average of 30 hours or more per week in NYC. Moreover, if, at any time, a covered employer’s workforce is reduced to fewer than 20 full-time employees, the employer must continue to offer the pre-tax benefit to all employees who were eligible for the benefit before the headcount reduction for the duration of their employment.
Unlike other laws recently passed by the NYC Council, the Act contains several safeguards for the business community. For instance, employers will not be subject to civil penalties for violations of the Act that occur before July 1, 2016. In addition to this six-month grace period, employers will have 90 days after a first violation of the Act to cure the violation (and avoid the $100-250 penalty that otherwise could be levied for such violation). After the 90-day cure period, an employer that has failed to remedy its first violation will be subject to recurring $250 civil penalties for every 30 days of continued non-compliance with the Act.
Notably, the Act does not apply to employees of (1) government entities, (2) employers that are parties to a collective bargaining agreement (unless 20 or more full-time employees are not covered by such agreement, in which case those employees are eligible for the Act’s benefits), or (3) employers that are not required by law to pay federal, state, and city payroll taxes. Additionally, the Department of Consumer Affairs (the DCA), the agency tasked with the enforcing the Act, may waive the Act’s requirements for a particular employer if it can demonstrate that offering qualified transportation fringe benefits would impose a financial hardship.
The DCA’s answers to a list of frequently asked questions about the Act can be found here.
What Does This Mean for My Company?
For some NYC employers, the Act will not pose any additional obligations. But for employers who do not currently offer qualified transportation fringe benefit programs to full-time employees, immediate action is necessary. These employers should consult with counsel as soon as possible to develop and implement the necessary benefits program by July 1, 2016.