On July 28, 2023, Illinois passed the Transportation Benefits Program Act, which requires employers located in Cook County and other specified localities to offer full-time employees the opportunity to buy transit passes on a pre-tax basis.
We've been receiving a lot of questions about this new law so we compiled a list of frequently asked questions and answers to assist employers with complying with this new requirement.
What Does the Law Require of Employers?
Under the new law, covered employers must provide a commuter benefit to covered employees that allows the employees to use pre-tax dollars to purchase a transit pass via a payroll deduction. The benefit must allow the cost of the transit pass to be excluded from the employee's taxable wages and compensation up to the maximum amount permitted by federal tax law.
How Much is the Maximum Benefit Amount?
For 2023 the maximum amount is $300 a month. Each year the amount will be adjusted for inflation and published by the IRS. The 2024 amount is expected to be released soon.
Isn't There Also a Parking Benefit That can be Paid With Pre-Tax Dollars?
When Does This Law Take Effect?
January 1, 2024
What Companies Does This Apply to?
The law applies to employers with at least 50 covered employees in a geographic area specified below at an address located within one mile of a transit service location in any of the following locations:
2) The following 38 townships:
- Addison Township
- Algonquin Township
- Aurora Township
- Avon Township
- Batavia Township
- Benton Township
- Bloomingdale Township
- Cook County
- Deerfield Township
- Downers Grove Township
- Dundee Township
- DuPage Township
- Elgin Township
- Frankfort Township in Will County
- Geneva Township
- Grant Township in Lake County
- Homer Township
- Joliet Township
- Libertyville Township
- Lisle Township
- Lockport Township
- McHenry Township
- Milton Township
- Naperville Township
- New Lenox Township
- Nunda Township
- Plainfield Township
- Shields Township
- St. Charles Township
- Troy Township
- Vernon Township
- Warren Township in Lake County
- Waukegan Township
- West Deerfield Township
- Wheatland Township in Will County
- Winfield Township
- York Township
- Zion Township
Which Employees Qualify for This Benefit?
An employee must average at least 35 hours of work per week. For newly hired employees, the benefit begins on the first full pay period after 120 days of employment.
Does This Benefit Need to be Offered to my Non-Illinois Employees
For companies that have employees in multiple locations throughout the US, this benefit only needs to be offered to the Illinois-based employees at the work-location within the proximity to a transit station.
How Can Employers Comply With This New Law?
Here's a few options:
- Utilize a TPA like P&A, Flores, Flex, etc. If you go this route, there will be a cost to the employer. Our employee benefits team can set up and manage this policy for our clients, just as we manage other FSAs offered by our clients.
- Employers may meet their obligation by participating in a Ventra program offered by the Chicago Transit Authority or the Regional Transportation Authority. The Ventra program offers this benefit at no cost to the employer and set up is rather simple. You would need to sign up through their website and set up the employee account and how much you would like to add monthly (up to $300 per regulations). You even have the option to set up recurring deposits so the only time you would need to log in is to pause/remove or add new contributions. Ventra would then issue cards to participants and bill the employer monthly. Additional details on their program can be found available here: https://www.ventrachicago.com/transitbenefits.
It should be noted that this service is self-administered by the employer (though it is fairly easy to administer), as opposed to the first option above where our employee benefits broker team assists. Also, Ventra bills employers monthly via ACH. This is the only payment method accepted by Ventra.
Key features of the Venture program:
- Allows employees to set aside pre-tax income - up to $300 per month - for travel on CTA, Pace, and Metra, lowering their taxes and easing their commute.
- Employers have access to a user-friendly administrator portal.
- Enrollment can happen anytime throughout the year and there's no minimum employee participation.
- Recurring reload functionality allows for repeating monthly fare loads after one-time employee set up.
This blog is for educational and/or informational purposes only and does not constitute tax, financial, or legal advice.