Employer Commute Services: ORCA passes for employees
ORCA Business Passport is a comprehensive, annual transportation program that is only available as an employer provided benefit.
Provides tax savings for both employer and employee
Companies and their employees can take advantage of tax-free and pre-tax commuter benefits.
Attracts and retains good employees
Adding transportation benefits enhances the company's overall benefits package. Transportation benefits cost less than other regular benefits but employees often use them more regularly, making them highly valued. Even if employees don't take advantage of these benefits, they remind employees that commute options are available. Given the cost of hiring and re-training even a single employee, this low-cost benefit could easily pay for itself as a factor in employee retention.
Reduces parking needs
Whether you pay for off-site employee parking or offer free parking, finite parking can limit company growth potential, use up customer parking space and add maintenance costs. Paying for outside parking is expensive for the company or the employee. Encouraging public transportation use can reduce these expenses.
Boosts wages by lowering transportation costs
Transportation benefits are a low-cost wage enhancement. Where wage increases are limited, transportation benefits effectively provide a monthly salary boost by reducing transportation costs through either a company subsidy or an employee-paid pre-tax option, or a combination.
Enhances company reputation
Traffic congestion, air pollution and environmental degradation are major topics of concern in our region. Companies that address these issues by providing commute benefits become known as leaders, good companies to work for, and good neighbors.
Lowers number of employees driving alone
If your company is one of the 600 companies in King County required by Washington State's Commute Trip Reduction law to reduce the drive-alone rate among your employees, offering bus passes at work can be a very effective element in your transportation program.
ORCA pass commuter benefits are similar to offering other tax-free programs, such as a flexible spending account, except the tax rules they fall under make commuter benefits easier to implement and manage. Compare Section 132(f) Commuter Benefits Plans versus Section 125 Flexible Spending Plans.
Subsidies: Employer can help pay costs or not
The company decides whether to subsidize (or help pay for) any part of the cost. An employer may offer commuter benefits in three ways:
- Employer-paid: Company covers the full cost of the benefit with a tax-free employer-paid subsidy.
- Employee pre-tax deductions: Company offers an employee-paid pre-tax payroll deduction.
- Employee/Employer share costs: Company and employee share costs with a combination of both of the above.
Tax savings for employers and employees
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Employer can provide employee with up to $130/month as a tax exempt benefit.
Employer pays no payroll taxes on the value of the benefit, which makes providing this benefit cheaper than providing a comparable salary increase.
The expense is a tax-deductible business expense for the company.
The expense can be claimed in part against State B&O tax.
The employee does not pay any taxes on the value of the pass provided.
Employee Pre-Tax Deductions:
Employer uses employee-reserved funds to purchase the pass requested by employee.
Employer pays no payroll taxes on the income that is reserved by the employee through a pre-tax deduction.
Employee saves on income tax and payroll tax. The payroll amount reserved is no longer treated as taxable salary.
Employee/Employer Share Costs:
Total employer and employee paid costs cannot exceed the monthly limits of $130/month for transit and vanpool without changing the tax treatment.
Same Employer Tax Benefits as Employer-Paid above for the employer's share of costs.
Employer further saves payroll taxes on the portion of the benefit paid by the employee through pre-tax deduction.
Employee does not pay taxes on the portion of the benefit provided by the employer.
Additionally, the employee saves on income tax and payroll taxes by taking a pre-tax deduction to pay for the remainder of his/her commuting costs.
Tax-exempt and pre-tax limits are set by the Internal Revenue Service
IRS limits for the 2014 tax year:
- Up to $130 per employee per month for vanpool, bus, ferry, rail (all public transportation).
- Up to $250 per employee per month for qualified parking, or
- Up to $380 per month per employee for both public transportation and qualified parking.
Employers are encouraged to consult a tax advisor or other professional for detailed information regarding the tax implications of commute benefits.
- Technical support for existing ORCA business accounts
- Support for employers affected by CTR law at Commute Solutions