With the recent passage of S1567, New Jersey has become the first state in the country to enact a worker-commuter benefit law. This law requires every employer in New Jersey that employs at least 20 employees, not subject to a collective bargaining agreement, to offer a pre-tax transportation fringe benefit, as defined by Section 132(f) of the Internal Revenue Code, that allows an employee to set aside wages on a pre-tax basis, which is then only made available to the employee for the purchase of certain eligible transportation services, including transit passes and commuter highway vehicle travel. An employee is identified as anyone hired or employed by the employer and who reports to the employer’s work location. This mirrors the definition used in the unemployment compensation law and other statutes.
Pre-tax transportation fringe benefits can be offered directly by employers or through third party providers. The federal benefit levels available for 2019 are $265 per month and are subject to cost-of-living adjustments by the Internal Revenue Service The transportation fringe benefit is not subject to payroll tax for the employer or the employee, allowing both the employer and employee to reduce their federal tax payments.
The employer is not required to offer a qualified parking or bicycle benefit, but may offer those benefits.
The law is effective immediately but will not be enforced until final rules and regulations are released by the N.J. Department of Labor and Workforce Development no later than March 1, 2020.
The law also requires the New Jersey Transit Corporation to establish a public awareness campaign in conjunction with the New Jersey Turnpike Authority and the South Jersey Transportation Authority. The campaign is to encourage workers to contact their employers about pre-tax transportation fringe benefits.
Note that this law amends a law enacted in 1992 which encouraged employers to adopt trip reduction programs.