New Law Extends $230 Transit Monthly Benefit Limit for 2011
Congress passed and President Obama signed into law on Friday, December 17, 2010, the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010. The law includes an extension of the $230 monthly pre-tax limit for work-related transit expenses.
In February of 2009 as part of the American Recovery and Reinvestment Act, Congress increased the amount that can be excluded from an employee’s gross income for transit benefits for mass transit expenses from $120 to $230 per month. The temporary increase to $230 was set to expire on December 31, 2010, but has now been extended through December 31, 2011. This does not affect the $230 per month limit for qualified parking excludable from an employee’s gross income, which will remain the same.
Transportation – a Popular Benefit for Commuters of all Types -
Subway and bus riders, train commuters, vanpool members, car drivers and even those who bike to work can enjoy the tax advantages and convenience of a transportation benefit plan.
With the plan, your clients can help employees pay for eligible commuting and reimburse parking expenses every month on a pre-tax basis and save money on payroll taxes yourself.
Everybody sees the tax advantages
Federal tax laws allow employees to set aside up to $230 in pre-tax earnings each month to pay for transit expenses, plus up to $230 per month for parking expenses, for a total of $460 per month. Employees who take the maximum deduction in 2011 can reduce their taxable income by more than $5,520 per year.
These reductions in taxable income are good for your clients’ bottom line, too, by reducing the employment taxes they pay: contributions are made pre-tax. Employers can save their share of Federal Insurance Contributions Act (FICA) tax (7.65%) for employees earning under the FICA maximum (currently $106,800) and the employer’s Medicare portion of FICA (1.45%) for higher-paid workers.
Example: An employee earning $60,000 contributes $120 per month for qualified parking on a salary reduction basis. The employer saves about $110 per year (7.65% X $120 per month X 12 months).
Bikes, too
You also can design the plan to support employees who bike to work. The IRS requires plan sponsors who choose this option to subsidize up to $20 per month per participating employee. Subsidies are in the form of vouchers that can be used toward bike purchases, equipment, repairs or storage fees associated with an employee’s commute. Other limitations apply.
The OptumHealth transportation services plan offers national coverage and lets employees use the same OptumHealth Financial Services website where they now manage their health accounts to also manage their transportation account and product needs.
To find out more, contact your OptumHealth Financial Services representative. Or call us at 1-866-427-6804.
