New Jersey Law Requires Employers to Offer Commuter Benefits

Apr 22, 2019
| Anissa Kurtz
New Jersey Commuting Benefit Law

Governor Phil Murphy and New Jersey lawmakers have been busy over the last year drafting and enacting new employment legislation. Almost all of these laws have been aimed at supporting employees working in the state.

So far this year, the Garden State has introduced a $15 minimum wage and created a state-run retirement savings plan.

In early March, the Governor signed another new bill into law that he says will help New Jersey workers with a common employment burden – commuting costs.

“Providing this pre-tax benefit to commuters throughout our state will reduce the financial burden of fares and parking costs, resulting in significant savings,” says Murphy.

The new law will provide most employees in the state with mandatory commuting benefits that could help lower the costs incurred by workers.

New Jersey Pre-Tax Transit Benefits Law

On March 1, 2019, New Jersey Governor Phil Murphy signed S.1567 into law which requires employers to offer pre-tax transit benefits to their workers. However, not all businesses will be subject to the new law.

Employers (both for-profit and not-for-profit) who are subject to New Jersey’s unemployment compensation law and who have 20 or more employees will be required to offer a pre-tax transportation benefit. Under the law, “employer” includes state and local governments.

Meanwhile, employers with 19 or fewer employees along with the federal government are exempt from the requirements.

The definition of an eligible employee under the law mirrors the definition used for unemployment compensation. However, employees who are covered by a collective bargaining agreement are not covered under the new transit benefit law.

The law does not yet address how quickly after being hired that employees are eligible to receive these benefits, but additional implementation guidance should be provided in the near future.

Employers will need to implement the program by March 1, 2020, or the effective date of New Jersey Department of Labor and Workforce regulations, whichever occurs first.

How Does the Transit Benefit Law Work for Employees?

Even though the program will require certain employers to offer transit benefits, employees are not required to participate.

Workers can choose to set aside pre-tax dollars up to the maximum benefit level permitted by federal law under tax code IRC section 132 ($265 in 2019). These funds can be used to pay for mass transit expenses incurred while commuting to work such as bus or train passes.

While the New Jersey law doesn’t require employers to include parking, they can offer this in their program if they choose. Once again, the maximum allowed would be determined by federal law (also $265 in 2019).

According to the Tri-State Transportation Campaign Deputy Director, New Jersey commuters could save up to $900 a year by using these new transit benefits.

New Jersey Employers Face Penalties with the New Law

Employers in the state who are subject to the Transit Benefits Law face penalties for failing to offer this program to their employees.

A first-time violation will cost employers a civil penalty of no less than $100 and not more than $250. The employer will then have 90 days to offer transit benefits.

If the benefits aren’t offered after 90 days, a subsequent violation and civil penalty of $250 will occur for each 30-day period where an employer fails to offer transit benefits.

Employers shouldn’t hesitate to reach out to HR compliance experts to learn more about this program, what it means for their business, and how to implement it properly to avoid fines.

Business leaders do have some time to plan for the New Jersey Pre-Tax Transit Benefit law, and additional guidelines are expected in the coming months to update the law before the state begins to enforce it.

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