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Transportation
Reimbursement Benefits FAQ
What
is a Section 132 (a.k.a. Transportation Reimbursement) Plan?
How does a Transportation Plan operate?
Who is eligible to participate?
What types of expenses are covered?
What are the maximum benefit limits?
Can an employee "double up" and receive
parking and mass transit benefits?
How must an employee elect to participate
in a Transportation Plan?
Can an employee change their Transportation
Plan election?
When must a request for reimbursement
be submitted?
What
substantiation of expenses is required?
What happens to unclaimed Transportation
Plan contributions when an employee separates from the company?
What
happens to unclaimed Transportation Plan contributions at the end
of my plan year?
Can
an employee claim reimbursement for the employee's spouse's or dependent's
qualified transportation expenses?
What
is a Section 132 (a.k.a. Transportation Reimbursement) Plan?
Section 132
(f) of the Internal Revenue Code, provides that employers can
provide certain employee work transportation benefits to employees
on a tax-free basis. Employees can obtain this benefit by electing
to contribute a portion of their employer compensation on a pretax
basis, to a fund from which they will receive tax-free reimbursement
for qualified transportation expenses.
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How
does a Transportation Plan operate?
An employee
elects to have a portion of his or her pay withheld (pretax) and
credited to an individual transportation account, from which he
or she can later receive reimbursement, on a tax-free basis, for
certain commuting expenses.
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Who
is eligible to participate?
Any employee
of an employer who sponsors a plan that is eligible for the employer's
benefit plan is also eligible for the transportation plan. The
plan is not available to independent contractors, self-employed
workers or those persons whose services are leased to the employer.
In addition, only individuals who are currently employees at the
time the qualified transportation benefit is provided are eligible
to participate.
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What
types of expenses are covered?
- Qualified
Parking Expenses - permits employees to pay for their share
of expenses, up to the lower of the statutory or plan limits,
for parking on or near the Employer's premises or at a location
from which the employee commutes to work on a pre tax salary reduction
basis. Costs of parking at, or near employee's residences are
not reimbursable.
- Transit
Pass Expenses - permits employees to pay for their share,
up to the lower of the statutory or plan limits of expenses for
mass transit passes, vouchers, etc. for commuting to work on a
pretax salary reduction basis.
- Commuter
Highway Vehicle (a.k.a. Vanpool) Expenses - permits employees
to pay for their share of expenses, up to the lower of the statutory
or plan limits, of vanpool expenses for commuting to work on a
pretax salary reduction basis. Vanpooling means transportation
between the employee's residence and place of employment in a
"commuter highway vehicle."
A
commuter highway vehicle is a highway vehicle with a seating capacity
of six or more adults (not including the driver) and where at least
80% of the mileage use for a year is utilized for the purposes of
transportation employees between their residences and places of
employment and on trips which the number of employees carried is
at least half of the adult seating capacity of such vehicle (not
including the driver).
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What
are the maximum benefit limits?
The maximum amount
allowed for the reimbursement of transportation expenses is prescribed
by law and determined on a monthly basis. The calendar 2004 benefits
limits are as follows: Please note: The employee must reduce their
election by any amount of transportation subsidy provided directly
by the employer.
$195.00 per month
- Parking
$100.00
per month - Transit Passes and vanpooling combined.
The Internal
Revenue Service prior to the beginning of each calendar year will
announce any cost-of-living adjustments.
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Can
an employee "double up" and receive parking and mass transit
benefits?
Employees
can contribute and be reimbursed up to the maximum amounts described
above for both the parking account and the transit/vanpooling
account. However, employees cannot claim both $100.00 per month
for transit passes and $100.00 for vanpooling, because the statutory
limit on mass transit benefits applies to transit passes and vanpooling
combined.
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How
must an employee elect to participate in a Transportation Plan?
An employee
must execute a compensation reduction agreement (election), which
must contain the following:
- The election
must be in writing or in another permanent and verifiable form
including electronic media.
- The election
document must contain the date in which the election was made.
- The election
must specify, in fixed dollar or fixed percentage of compensation
terms, the amount of compensation to be reduced. The amount may
not exceed the applicable statutory limits.
- The election
must specify the period for which the benefit will be provided.
Unlike cafeteria plan (Section 125) elections, the period of coverage
does not have to be a 12-month period. The election period under
a transportation plan can be as little as a pay-period. Generally,
employers designate a calendar month as the election period.
- All elections
must be done on a prospective basis. That is, an employee cannot
begin to participate in a transportation benefit any earlier than
the date (as indicated on the election document) in which the
employee elected to participate. Like, cafeteria plans; retroactive
elections are specifically prohibited under the transportation
regulations as well.
- Elections
must be irrevocable for the specified period.
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Can
an employee change their Transportation Plan election?
Yes, employees
may change their elections. Unlike cafeteria plans, where the
participant must experience a qualified status change to make
an election change, a participant in a transportation plan can
make a change just by choice. The frequency of how often a plan
participant can make an election change is determined by plan
sponsors plan design. Most employers design their plans to permit
employees to change their elections monthly.
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When
must a request for reimbursement be submitted?
Under the
regulations, employees must submit requests for reimbursements
within 180 days of incurring expenses, but not later than 90 days
following the last day of the employer's designated plan year.
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What
substantiation of expenses is required?
Employers
must implement "reasonable procedures" to ensure that
employees have actually incurred expenses equal to the amount
of reimbursement being requested by the employee. The regulations
state that an employee's substantiation (signed claim form) plus
a parking receipt or used transit pass will suffice. If receipts
are not provided such as in metered parking situations, an employee
certification alone is adequate. An employee certification
in either written or electronic form is adequate. Note:
It is unacceptable for the employee to certify in advance that
the employee will incur the expense at some future date.
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What
happens to unclaimed Transportation Plan contributions when an employee
separates from the company?
A qualified
transportation plan cannot refund unused amounts. Generally, these
moneys revert to the employer to offset administrative costs.
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What
happens to unclaimed Transportation Plan contributions at the end
of my plan year?
Under the
regulations, unused contributions in your account at the end of
your plan year will roll over into the next plan year.
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Can
an employee claim reimbursement for the employee's spouse's or dependent's
qualified transportation expenses?
Under the
regulations, the Transportation Reimbursement Benefit can only
reimburse for the employee's qualified transportation expenses,
not those of the employee's spouse or other dependents.
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