Commuter Benefits Guide for Long Island Employers

If you're a Long Island business owner watching talented employees leave for companies offering better benefits packages, commuter benefits might be the missing piece of your retention strategy. These programs allow employees to pay for transit and parking expenses with pre-tax dollars, creating real savings that employees notice every month.

What Are Commuter Benefits?

Think of commuter benefits as a special account where employees can set aside money before taxes are taken out, then use that money to pay for work-related transportation costs. It's similar to a health savings account, but specifically for getting to and from work.

The program covers two main categories: transit expenses (like LIRR passes, subway cards, and bus fares) and parking costs (monthly parking passes, daily parking fees, and even some ride-sharing services). For Long Island employees who commute into Manhattan or travel between Nassau and Suffolk counties, these expenses add up quickly.

How Commuter Benefits Work

The process is straightforward. Each month, participating employees decide how much they want to contribute to their commuter account, up to current IRS limits. This money comes out of their paycheck before federal, state, and Social Security taxes are calculated, reducing their taxable income.

Employees typically receive a debit card or vouchers to pay for qualified expenses. When they swipe their card at Penn Station for an LIRR pass or pay for parking at their office building, the money comes from their pre-tax commuter account. Some employers offer reimbursement systems where employees submit receipts for approved transportation costs.

The key is that employees must estimate their monthly commuting costs in advance. Unlike some benefit accounts, unused commuter benefits don't roll over indefinitely, so employees need to plan carefully.

Why Long Island Employers Offer Commuter Benefits

For business owners, commuter benefits create a win-win situation. First, you save money on payroll taxes. When employees contribute to commuter accounts, you don't pay Social Security, Medicare, or unemployment taxes on those dollars. For a practice with multiple employees commuting from expensive areas, these savings add up significantly over the year.

More importantly, these benefits help you compete for talent without increasing salary costs. A medical practice in Garden City competing with Manhattan firms can offer commuter benefits that effectively give employees a raise without impacting the practice's bottom line. It's particularly valuable for attracting employees who live far from your office or commute into expensive parking areas.

Employee benefits packages that include practical, money-saving options like commuter benefits also improve retention. When employees calculate their total compensation, they include these tax savings in their decision to stay with your company.

What Employees Gain

From the employee perspective, commuter benefits provide immediate, tangible savings. An employee spending several hundred dollars monthly on LIRR passes and Manhattan parking can save hundreds of dollars annually in taxes by using pre-tax dollars instead of after-tax income.

The benefit is especially valuable for Long Island employees because commuting costs here are substantial. Between train fares, gas, tolls, and parking, many employees spend significant portions of their income just getting to work. Pre-tax treatment makes these necessary expenses more affordable.

Employees also appreciate the convenience of automated deductions and employer-provided payment methods. Instead of budgeting for large monthly transit passes or daily parking fees, they have a systematic way to manage these predictable expenses.

Key Considerations for Setup

Before implementing commuter benefits, consider your workforce's commuting patterns. If most employees drive short distances with free parking, the benefit may have limited appeal. However, if your team includes commuters traveling into Nassau County, Suffolk County, or New York City, commuter benefits could be highly valued.

You'll need to choose between different administration options. Some employers handle the program internally, while others work with third-party administrators who manage the accounts, cards, and compliance requirements. Consider your HR bandwidth and comfort level with benefits administration.

Think about communication strategy as well. Employees need to understand how the program works and calculate potential savings to make informed enrollment decisions. Without proper explanation, even valuable benefits like this can have low participation rates.

How Benton Oakfield Simplifies Commuter Benefits

At Benton Oakfield, we handle the complexity of commuter benefit programs so Long Island business owners can focus on running their practices and firms. We help you evaluate whether commuter benefits make sense for your specific workforce, then guide you through setup and ongoing administration.

Most importantly, we ensure your employees understand how to use these benefits effectively. We provide clear enrollment materials and answer employee questions, so your team actually takes advantage of the tax savings available to them.

Ready to explore whether commuter benefits could strengthen your employee package and reduce your payroll costs? Contact our team to discuss how this benefit fits into your overall compensation strategy.

Compliance Note: Benefit plan rules and tax implications vary based on company size and location. This guide is for educational purposes only. Please contact your Benton Oakfield representative to discuss how this applies to your specific situation.

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