2009 Transportation Fringe Benefits Increase

The Transportation Equity Act for the 21st Century (known as TEA-21) established and adopted by the U.S. Congress in 1999 allows employers to offer to their employees a pre-tax fringe benefit for qualified transportation. In January 2000, the IRS issued regulations under IRS Code Sec 132(f)(4) to administer this plan.

The monthly limit for transit passes and commuter highway vehicles that are qualified transportation fringe benefits is $120.00 in 2009. The monthly limit for the qualified parking benefit will increase to $230 in 2009, up from $220 in 2008. While the legislation clearly intends for the employer to provide the actual transit pass, not a cash advance for its purchase, cash reimbursement is allowed if the employer can demonstrate that they would incur a significant administrative expense if they pre-purchased and distributed the pass. We recommend that the employer require the nanny provide a receipt to qualify for the reimbursement.

The provision of transit passes by employers to their nanny or housekeeper, subject to the monthly limits, is a pre-tax benefit. Everyone wins because taxes are reduced for employers as well as employees.