NYC Employers Required to Provide Pre-Tax Transit Benefits to Employees in the New Year

As the end of the year rapidly approaches, new statutes affecting employers and employees are set to become effective.  Among them is a New York City ordinance, titled “Mass Transit Benefits Law,” which requires every employer with twenty or more full-time employees in New York City to offer those full-time employees the option to use pre-tax earnings to purchase “qualified transportation fringe benefits,” except for qualified parking.   The law defines “full-time employees” as “employees who work an average of thirty hours or more per week for such employer for such period of time as the commissioner establishes by rule.”  Although final rules have not been published, the proposed rules provide that to qualify as a full-time employee, the employee must have worked an average of 30 hours or more per week in the most recent four weeks, any portion of which was in New York City, for a single employer.”

The law entitles only those employees who are eligible to receive “qualified transportation fringe benefits” under the Internal Revenue Code to be offered the option to purchase them.  Consequently, the ordinance does not require employers to offer such pre-tax transportation benefits to independent contractors, partners and two percent shareholders of S-corporations.  Should the Internal Revenue Code redefine the meaning of qualified transportation fringe benefits at some point in the future, that revision would  apply to the New York City ordinance also.

Temporary help firms are specifically addressed in the proposed regulations , because their employees are generally sent to work at various locations and employers.  According to the ordinance, a temporary help firm that provides a full-time employee to another organization will be the employer for purposes of complying with the statute, even if the organization/client does not have the requisite number of employees to fall within the statute’s coverage.  In determining hours worked each week by an individual employed by a temporary help firm, the employer is required to aggregate the number of hours worked by the employee in the most recent four weeks at all placements.

Although the law becomes effective on January 1, 2016, employers will not be subject to penalties for noncompliance until July 1, 2016.  Penalties for a first violation will range from $100 to $250, and then $250 for each subsequent violation.  The statute will be administered by the New York City Department of Consumer Affairs.

If you have any questions regarding the New York City Mass Transit Benefits Law, you can contact Salvatore G. Gangemi.

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