Commuter Benefits Programs in the United States

As Pioneer Institute staff wrote recently, late in 2018, the MBTA introduced a rebranding of its corporate benefits program, called “Perq.” The new benefit program for businesses and commuters features a new website, fare cards, and additional information for workers and employers to sign up for the benefit program. The program allows commuting workers to save up to 40 percent on fares by using pre-tax dollars to pay for their commuter expenses.

Pioneer research has found that these commuter benefit programs can significantly improve the public financing of the MBTA. In a 2018 study, Pioneer found that a 20 percent increase in employer and employee usage of the commuter benefits program would increase the MBTA’s revenue by $70 million a year. Pioneer laid out five benefits of the commuter benefits program:

1. The program lowers transit fare costs for employees
2. Increasing public transit use reduces overall commuting time and increases worker productivity
3. These benefit programs can help companies attract workers in a tight labor market
4. The MBTA can gain additional revenue and more predictable cash flow
5. Increasing public transit use can reduce car travel, not only reducing road congestion but also reducing carbon emissions and allowing for a cleaner environment.

The Boston area is not the only place around the country that has a commuter benefits program. According to a report from the consulting firm Ernst and Young, Berkeley, Richmond, Los Angeles, and the Bay Area in California, along with New York City and Washington, D.C., all require that companies provide commuter benefit programs for employees if they employ a certain number of workers. Furthermore, many states provide state-level income and payroll tax incentives for commuter benefits programs.

Federal tax reform in 2017 reduced some federal tax incentives for commuter benefit programs. After the passage of the Tax Cuts and Jobs Act, businesses can no longer deduct expenses associated with fringe transportation benefits (in other words, employer-provided commuter benefit programs). Now, those fringe benefits, along with qualified expenses for bicycle commuting, must be included in employer wages.

On the other hand, as Ernst and Young noted, individual taxpayers (as opposed to businesses) can exclude up to $260 a month in transit and van pool benefits and $260 a month in parking benefits.

Got an idea for how to improve commuter benefits programs, or other ways to encourage transit use? Enter Pioneer Institute’s Better Government Competition for your chance to win $10,000!