When Wendy Alders Cartland, director of human resources at Kirkland & Ellis, a Chicago-based law firm, lived in the suburbs, she commuted five days a week. Cartland drove to her local train station, parked her car and took the train to her office in the Loop. In 1999, she moved to Chicago and now takes the bus to work.
Everyone knows parking and train fare are expensive. And even bus fare eventually adds up.
Cartland, however, has been able to reduce her transportation costs with help from the federal government and her employer.
And it’s not a token gesture.
“In 1998, we introduced a commuting benefit under a federal law allowing employers to offer transit and parking benefits,” said Cartland, whose firm has 2,000 employees and offices in Los Angeles, New York, Washington and London.
The Internal Revenue Code allows employers to provide work-related transportation benefits to employees on a pretax basis–similar in many ways to pre-tax deductions for dependent care and medical costs–of up to $100 a month for public transportation and $185 for parking.
Ernst & Young, for instance, a professional services firm, now provides its employees transportation and parking options, a benefit expected to reduce by 40 percent its workers’ commuting costs–and also to lower the firm’s payroll taxes.
Transit benefits are used to purchase public transportation, such as train tickets or commuter cards for buses and elevated trains, or to pay for van pooling.
As for parking fees, they also can be included in your pretax savings.
Employee taxable income goes down slightly because $100 a month is not subject to taxes–and you would have had to pay for transportation anyway. And, unlike dependent care, you’re not locked into it for an entire year: It’s a monthly benefit.
At Kirkland & Ellis, 800 employees worldwide use the transit benefit, with an average savings of $200 a year each. Cartland only has figures for parking for Chicago, where 200 employees participate, with an average annual savings of $300 each.
“The beauty of it is that it encourages people to use public transportation,” said Cartland, who has worked in human resources for almost two decades. “It’s for everyone, whether you’re single or married, male or female, young or old, have children or live in the city or suburbs. And I find when I’m interviewing job applicants that it’s a benefit they recognize and appreciate, so it also helps me in hiring and retaining. It’s terrific!”
Here’s how it works for Cartland: When she lived in the suburbs, parking at the train station cost her $80 a month, so she saved $10 a month in pretax savings. And she saved $20 a month off her train ticket.
Now that she uses the bus, she saves $7.50 a month.
“I save money because my transit costs are taken out of my paycheck before state or federal taxes are deducted, so that reduces the amount of taxes I pay,” said Cartland. “And it’s a no-brainer to acquire my transit pass. I don’t even have to stand in line: I pick it up at the reception desk at the office once a month. How can you argue with that?”
Cartland is not alone in her enthusiasm.
According to a 2001 survey by Xylo Inc., a provider of Web-based work/life solutions based in Bellevue, Wash., 86 percent of 600 U.S. workers say transit assistance benefits are “beneficial and useful.”
Unfortunately, only 17 percent of those surveyed work for employers who provide them.
But Michael Barto, director of new business development at The Voucher Corp., an employee benefits company with headquarters in Cypress, Calif., says transit benefits are “increasing rapidly, especially because regulations, which previously had been cumbersome, are less complicated.”
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Barto’s firm administers transportation vouchers for 2,540 U.S. companies.
“Everybody has to get to and from work, and that’s why the use of this benefit is becoming `hot,’ said Barto. “It’s very easy to administer and it’s user-friendly.”
And it gets you where you’re going.
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