By offering pre-tax commuter transit benefits to employees, employers can improve an employee's total compensation, attract and retain high quality candidates, facilitate and simplify return to office (RTO) initiatives, and decrease their FICA spend, all while abiding by legislative requirements.
Offering a pre-tax benefit to employees reduces their taxable income, reducing their income tax payment and increasing their total compensation.
Attracting and Retaining Quality Candidates
Employers may find that offering transit benefits is what differentiates them from their peer sets, especially if they subsidize some portion of the benefit. This also helps with overall employee attraction and retainment, which is always good!
Returning to Office
With an emphasis on returning to office (RTO), employers can offer the transit benefit to alleviate some of the cost of RTO initiatives, improving employee net promoter score (eNPS).
Employers and employees pay FICA (Federal Insurance Contributions Act) taxes to contribute to Medicare and Social Security. When an employee contributes to their commuter benefits plan, this is reduced from their taxable wages, thus reducing the amount an employer has to spend on FICA liability.
Lastly, some cities such as Washington, D.C.; New York City; San Francisco; soon Philadelphia; and others require that employers provide a transit benefit to assist with getting to work.