Here is some information to help you reduce traffic congestion and air pollution by changing your work schedule, participating in the California Parking Cash-Out program, or taking advantage of the Commuter Choice federal tax program:

Alternative Work Hours and Flex Schedules

Alternative work hours and flex schedules are work hours other than the standard 8:00 a.m. to 5:00 p.m., Monday through Friday schedule.

Compressed Workweek:

A popular way to reduce commute trips is to work longer, yet fewer days each week. The following table describes common compressed workweek schedules:

9/80	Employees who work a 9/80 schedule perform the required 80 hours of work in a two-week period, but within 9 working days instead of 10. Because 80 hours cannot be divided equally among 9 days, employees will work 9 hours for 8 days, 8 hours for 1 day, and will take 1 day off.
4/40	Employees who work a 4/40 schedule work four 10-hour days every week.
3/36	The option used most by fire and police departments, health care facilities, and manufacturing companies, the 3/36 schedule includes three 12 hour shifts each week.

Compressed Workweek Benefits:

• Longer service hours
• Improved moral
• Aids recruitment and retention

New Overtime Legislation:
On January 1, 2000 a new state law (AB 60) went into effect requiring overtime payment for many employees when a workday exceeds eight hours or a workweek exceeds 40 hours. Qualified compressed workweeks may be established without the overtime payment requirement if at least two-thirds of all affected employees vote by secret ballot in favor of the compressed workweek.

Before establishing a compressed work schedule program, be sure to consult with a labor law expert and make sure your plan complies with this new law. (Government employees are exempt from AB 60.)

Flex Time:

Flex time allows employees to set or modify their arrival and departure times to meet their transportation needs. For example, the work schedule may be adjusted to match a vanpool, bus or carpool schedule. Flex time policies usually require that the flexibility in scheduling must not conflict with work flow.

California's Parking Cash-Out Law:

State law requires certain employers who provide subsidized parking for their employees to offer a cash allowance in lieu of a parking space. This law is called the Parking Cash-Out Program. It was enacted after studies showed cash allowances in lieu of parking encourage employees to find alternative means of commuting to work, such as carpooling and transit. Parking Cash-Out offers the opportunity to improve air quality and reduce traffic congestion by reducing vehicle trips and emissions.

For an informational guide to California's Parking Cash-Out Law, click here. This guide includes a checklist to help employers determine if they are subject to this law.

Tax Advantages for Employer Provided Transportation Benefits:

Great news for employers and employees! Thanks to the Transportation Equity Act for the 21^st Century (TEA-21), employers can receive tax benefits for providing certain types of employee transportation benefits. The following provides general information about allowable federal tax incentives. You should consult with your company’s accountant and/or tax attorney to ensure compliance with tax codes and filling requirements.

Four tax advantaged transportation benefit options are available:

1. Benefits in Addition to Salary: Employers may provide up to $100 per month to employees who commute to work by transit or vanpool. The employer pays for the benefit and receives the equivalent deduction from business income taxes. Employees receive the benefit completely tax free of payroll and income taxes, in addition to their current salary. Employers can pay directly for vanpool expenses or purchase transit passes for employees. Alternatively, they can reimburse employees if these passes are not available and the employee provides a receipt.
   

2. Benefits Instead of Salary: Employers may permit their employees to set aside up to $100 per month of their pre-tax income to pay for transit or vanpools. Employees save on income taxes since the amount is no longer reported as taxable salary. Employers are able to reduce their payroll costs.
   

3. Combination: Employers may share the cost of commuting with their employees. Employers can give their employees part of the transportation cost in addition to salary and allow their employees to set aside part of their pre-tax income to pay the remaining amount. The employer can subsidize any amount, but only $100 per month is tax deductible. Any amount over that is taxable.
   

4. Parking Cash Out: Employers may offer employees the option of cashing out the value of employer provided parking. Employees forego the parking and either receive the taxable cash value of the parking space, or a tax-free transit or vanpool benefit of up to $100 per month.

Helpful Resources:

Federal Transit Administration Commuter Choice Tool Kit:  It's all here! Sample forms, implementation details, official IRS guidance, information about state and local income taxes and more.

Association of Commuter Transportation (ACT) produces a great TDM Toolkit for specific answers to questions you may have about Commuter Choice.

Chart showing typical annual tax savings: Courtesy of www.commutercheck.com

Best Workplaces for Employers Tool Kit:  The Environmental Protection Agency and the Federal Department of Transportation formed this program to recognize exemplary employers who provide great commuter benefits for their employees.  Their site has lots of great information about commuter benefits for employers and employees. The site says, "this toolkit was designed to help you enhance your commuter benefits program and increase employee participation. The kit also contains resources to help you increase your visibility as one of the Best Workplaces for Commuters through internal and external promotion."

Just So You Know…

• Benefits in addition to salary are treated as a regular business expense similar to medical insurance premiums.
  

• Transportation benefits are excluded from cafeteria plans. IRC Section 125 covers cafeteria plans and flexible spending accounts. Section 132(f) covers transportation benefits.
  

• Section 132(f) benefits are exempt from anti-discriminatory requirements. The employer decides who receives the benefits.
  

• There is no “use it or lose it” rule. Any amount not used by the employee at the end of the year is returned to the employee the following year as taxable income.  
  

• Payments can be made through a transit pass/voucher program, or through a cash reimbursement (See IRS Announcement 94-3, Q-3).  If a transit pass/voucher program is available to the employer, they may provide the transit pass/voucher to their employees free, or sell them. In cases where cash reimbursement is allowed, a bona fide arrangement may include receipts, copies of transit passes purchased or other type of record keeping which substantiates the expense. Employers may not use cash advances to provide transportation benefits.  
  

• Employees excluded from Section 132(f) Benefits - Certain employees are not eligible to receive section 132(f) benefits. These employees include partners, self-employed individuals and shareholders of subchapter S corporations. Such employees fall under another section of 132 called “de minimis” benefits, section 132(e). These employees may receive up to $21 a month, $252 a year, as a tax-free benefit to use for transit but not vanpools. A quirk in the law triggers a penalty if these employees receive any amount over the federal annual limit by making the entire amount taxable! This “cliff” effect is limited to these employees. Cash reimbursement or cash advances are not allowed under these sections.
  

• Benefits in Excess of the $100 or $175 per month are taxable – if the fair market value of a benefit provided is more than the federal statutory limit ($175), employers must include in the employee’s wages the amount over the limit, minus any amount paid by the employee.

                Last updated 6/3/04