Transit and Vanpool Benefits:


Implementing Commuter Benefits

as One of the Nation’s

Best Workplaces for CommutersSM

United States Environmental Protection Agency 

Office of Air and Radiation 

November 2005 
Transit and Vanpool Benefits 

Implementing Commuter Benefits 

as One of the Nation’s 

Best Workplaces for CommutersSM 

X Employers can provide up to $105 per month in tax-free transit/vanpool benefits to employees. The 

employer does not pay payroll taxes on the benefit, and employees do not pay income or payroll taxes on 

it. As a result, giving an employee $105 in transit/vanpool benefits is less expensive for an employer than 

raising the employee’s salary by $105, and the employee takes more home. 

X Transit/vanpool benefits may be provided in a variety of ways: through regional voucher programs, transit 

passes, or cash reimbursement (in certain circumstances). 

X Providing transit/vanpool benefits is one of the primary benefits employers participating in Best 

Workplaces for CommutersSM can offer employees. Employers must offer at least one of three primary 

benefits to their employees to be recognized as one of the Best Workplaces for CommutersSM (the other 

two are parking cash-out and telework). Under this option, the employer agrees to provide at least $30 

per month in transit/vanpool benefits for any employee (or the full monthly commuting expense if it is 

less than $30 per month). 

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Transit and Vanpool Benefits: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

This document is one in a series of briefing papers designed 

to help employers that are Best Workplaces for CommutersSM 

implement commuter benefits. 

The U.S. Environmental Protection Agency (EPA) and the 

U.S. Department of Transportation (DOT) have established 

a voluntary National Standard of Excellence for employer-provided commuter benefits. Commuter benefits help American 

workers get to and from work in ways that cut air and global 

warming pollution, improve public health, increase worker 

productivity, and reduce expenses and taxes for employers 

and employees. Employers that agree to meet the National 

Standard of Excellence are recognized as Best Workplaces for 

CommutersSM and agree to: 

X Centralize commute options information so that it is easy 

for employees to access and use 

X Promote the availability of commuter benefits to employees 

X Provide access to an emergency ride home (ERH) program 

X Provide one or more of the following primary commuter 

benefits: 

✓ Vanpool or transit benefits of at least $30 per month 

✓ Parking cash-out of at least $30 per month 

✓ Telework program that reduces commute trips by 6 

percent 

✓ Other option proposed by employer and agreed to by 

EPA. These services must reduce the rate at which 

employees drive to work alone and be perceived by 

employees as a significant workplace benefit. Options 

may include things like vacation time for carpoolers 

and comprehensive shuttle services. 

X Provide three or more of the following additional commuter benefits: 

✓ Active membership in a Transportation Management 

Association (TMA) or similar organization or participation in a regional air quality initiative 

✓ Membership in a local ozone awareness program 

✓ Ridesharing or carpool matching, either in-house or 

through a local or regional agency 

✓ Pre-tax transit or vanpool benefits 

✓ Parking cash-out less than $30 per month or less than 

75 percent of the actual parking benefit 

✓ Shuttles from transit stations, either employer-provided or through a local agency 

✓ Parking at park-and-ride lots or vanpool staging areas 

✓ Preferred parking for carpools and vanpools


✓ Employer-run vanpools or bus programs


✓ Employer-assisted vanpools


✓ Secured bicycle parking, showers, and lockers


✓ Electric bicycle recharging stations


✓ Employee commuting awards programs


✓ Discounts/coupons for bicycles and walking shoes


✓ Compressed work schedules


✓ Teleworking


✓ Lunchtime shuttle


✓ Proximate commute (working closer to home)


✓ Incentives to encourage employees to live closer to


work


✓ On-site amenities (e.g., dry cleaning)


✓ Concierge services


✓ Participation/membership in a carsharing program 

✓ Other options proposed by employer 

X In addition, employers commit to ensuring that within 18 

months of applying, single occupancy vehicle trips are 

reduced by at least 14 percent. 

Disclaimer 

SM . 

EPA provides this briefing as a service to employers participating in the Best Workplaces for Commuters

Information about private service providers is intended for 

informational purposes and does not imply endorsement by 

EPA or the federal government. 

The information presented here does not constitute official 

tax guidance or a ruling by the U.S. government. Taxpayers 

are urged to consult with the Internal Revenue Service of 

the U.S. Department of Treasury or a tax professional for 

specific guidance related to the federal tax law. 

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Transit and Vanpool Benefits: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

Contents 

Transit and Vanpool Benefits: A Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5


Employer Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5


Cost Savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6


Tax Considerations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7


Employer-Paid Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7

Employee Pre-Tax Salary Deduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Examples of Tax Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Employee Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Employee Cost Savings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Increased Employee Satisfaction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

When Transit/Vanpool Benefits Make Sense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Locations with Access to Transit or High Occupancy Vehicle Lanes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Locations with Limited or Expensive Parking and Long Commutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

Employers with Recruitment or Retention Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

Implementation Issues and Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

Fewer Administrative Requirements Than Flexible Spending Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

Costs and Corporate Cash Flow . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9

Distribution of Passes or Vouchers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

Dealing with Multiple Transit Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

Using Cash Reimbursement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10

Equity Issues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

Guide to Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11

Employer Questions and Answers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13

How difficult and costly is it to administer a transit/vanpool benefit program? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13

What are the cost implications of implementing transit/vanpool benefits for my company? . . . . . . . . . . . . . . . . . . . . . . . . .13

If I implement a transit/vanpool benefit program, am I required to offer the full value of $105 to my employee? . . . . . . . .13


What if a monthly pass costs $125 per month? Am I limited to providing a $105 benefit per month? . . . . . . . . . . . . . . . . .13

Do transit passes need to be distributed on a monthly basis? What if I want to provide my employees with annual transit


passes? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

How are benefits treated if an employee terminates employment and the transit passes cover multiple months? . . . . . . . . . .14


Under what circumstances can an employer offer benefits in the form of cash payments rather than using transit vouchers or


passes? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

Must a qualified transportation fringe benefit plan be in writing? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14

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Transit and Vanpool Benefits: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

What are the benefits and downsides of using a commercial voucher provider? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15


What is a vanpool? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15


Does an employer need to operate a vanpool to provide vanpool benefits? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15


What are the best ways to promote a transit/vanpool benefit program? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15


Do any state or local governments offer any incentives for doing this? . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15


Employer Case Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16


Seattle, Washington—Minor & James Medical Clinic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16


Boston, Massachusetts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16


Chicago, Illinois—General Growth Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16


Portland, Oregon—Intel Corporation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16


Atlanta, Georgia—Georgia Pacific/Southern Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16


Milwaukee, Wisconsin—University of Wisconsin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17


Bethesda, Maryland—Calvert Group . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17


Los Angeles, California—Transamerica Life Companies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17


Minneapolis, Minnesota—American Express . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17


Services That Support Implementation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17


Local Governments and Transit Agencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17


Supporting Services—Emergency Rides Home and Information Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18


Associations and Contacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18


Regional and Local Transit Agency and Government Contacts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18


Transit/Vanpool Voucher Providers and Other Services (Regional and National) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18


For More Information on Employer and Employee Tax Implications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19


Emissions and Transportation Benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19

Vehicle Trips . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19

Emissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20

References and Publications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21


Appendix A: Regional Transit Benefits Programs . . . . . . . . . . . . . . . . . . . . . . . . . 22


Appendix B: Transit Benefits Decision Chart . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25


Appendix C: Brief History of Transit/Vanpool Benefits . . . . . . . . . . . . . . . . . . . . . 26


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Transit and Vanpool Benefits: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

Transit and Vanpool

Benefits: A Summary 

Transit/vanpool benefits are qualified transportation fringe 

benefits that employers provide to their employees to help 

them commute to work using transit or vanpools.1 In most 

cases, the employer purchases a transit pass or a transit/vanpool voucher and gives it to the employee. In some cases, the 

employer may reimburse employees in cash for transit 

expenses.2 Although this paper uses the general term “transit 

pass,” a pass could be an unlimited ride pass, tokens, tickets, 

or farecards.3 Passes are generally issued by a single transit 

agency only for use on its services. On the other hand, a 

transit/vanpool voucher can be exchanged by the employee 

for a transit pass, tokens, or tickets on multiple transit services, or payment of vanpool charges. Vouchers cannot be 

exchanged for cash; they must be redeemed by designated 

transit agencies or vanpool operators. 

Federal tax code allows employers to offer up to $105 per 

month ($1,260 per year) in transit/vanpool benefits tax free. 

To qualify with the transit or vanpool benefit as a primary 

benefit, an employer must contribute at least $30 per 

month. If the monthly commuting expense for employees is 

less than $30 per month (e.g., $25/month), the employer is 

only required to contribute that amount per month 

($25/month instead of $30). Some employers allow employees to purchase the transit or vanpool benefit using pre-tax 

dollars (frequently called a pre-tax transit or vanpool benefit). While this option does take advantage of some of the 

tax benefits of transit and vanpool benefits, it does not provide either the full value of transit or vanpool benefits to the 

employees or the employers. It is therefore not considered a 

“primary benefit” by the Best Workplaces for CommutersSM 

program. 

Employer-provided transit/vanpool benefits make it less 

expensive and easier to use transit or vanpools to commute 

to work, and are usually popular with employees. In recent 

years, programs encouraging distribution of transit passes by 

employers have become increasingly popular. Employers tend 

to view the programs as a low-cost way to provide employees 

with a very desirable benefit. Since transit/vanpool benefits 

are tax-free transportation fringes, employers can save money 

on payroll taxes when they offer these programs. 

The employer is not limited to providing a transit/vanpool 

benefit of $105 per month. However, if, for any month, an 

employer provides an employee with a qualified transportation fringe benefit that exceeds the statutory tax-free limit, 

the excess value must be included in the employee’s gross 

income for income and employment tax purposes. A brief 

history of recent changes in tax legislation that have affected 

transit benefits is provided in Appendix C. 

Employer Benefits 

An employer can benefit in several ways by offering 

transit/vanpool benefits. 

Transit/vanpool benefits can improve employee morale and 

make an organization a more desirable place to work, which 

in turn can: 

X Reduce employee absenteeism and stress 

X Reduce employee turnover 

X Support recruiting and retention goals 

A Department of Transportation (DOT) survey of employers 

offering TransitChek® in the New York and Philadelphia 

areas found overwhelming positive response by employers 

and employees: 

X More than 70 percent of the TransitChek® users in the first 

two surveys said they developed more positive opinions of 

their employers because of TransitChek®. Favorable comments from respondents included that the program gave 

transit a favorable image, increased their usage of transit, 

was simple and easy to use, and helped to defray transit 

costs and fare increases. 

X When asked to characterize the relative importance of 

TransitChek® as an employee benefit, 48 percent [of 

employers] viewed it as “very important,” 40 percent said 

it was “somewhat important,” 12 percent chose “of limited importance,” and only 1 percent said that it was “not 

important at all.” 

X All of the organizations reported TransitChek® was very 

popular among their employees, and the companies themselves viewed it positively, in general. 

1 For more information on vanpools, see the separate briefing paper on Vanpool Programs. 

2 The employer may provide transit benefits through a cash reimbursement plan only if the voucher providers charge a fee that exceeds one percent of the cost of the 

vouchers. See Implementation Issues and Costs section. 

3 Although the IRS regulations include "voucher" within their definition of “transit pass,” because of the operational differences this briefing paper defines them 

separately. 

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Transit and Vanpool Benefits: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

One state agency, prevented from raising employee salaries by 

state legislation, appreciated TransitChek® as a means to give 

employees a tax-free benefit equivalent to a greater value in 

pretax salary dollars (DOT, 1995). Reaction to university 

programs mirrors these positive reactions, even to improving 

recruitment and retention. 

UPASS has the ability to attract and retain students at 

University of Wisconsin-Milwaukee (UWM). Participants in 

focus group discussions mentioned the UPASS could attract 

potential students to UWM. Spring 1995 survey results indicate 15 percent of respondents said the UPASS would have a 

major impact on their decision to attend UWM in future 

semesters while 21 percent indicated the UPASS would have 

a minor impact. (Meyer and Beimborn, 1996) 

Cost Savings 

Offering transit/vanpool benefits can be a very low-cost way 

to provide employees with an additional benefit. Transit/vanpool benefits provide the employer with lower payroll taxes 

compared to offering an equivalent salary increase. Offering a 

pre-tax deduction option can actually save a company money 

since the company does not pay payroll taxes on the amount 

of income reserved by the employee. Employees also pay less 

in income taxes and social security taxes. However, in some 

cases, voucher providers charge fees, which may reduce the 

cost savings to employers. Moreover, reducing the number of 

employees driving to work can result in reduced needs for 

employee parking. Parking is expensive to build or lease, particularly in urban areas. As a result, transit/vanpool benefits 

often provide a low-cost way to avoid the large expense associated with securing additional parking. Unlike parking, 

which is a long-term decision (leases are typically negotiated 

on an infrequent basis, and the decision to construct new 

parking has long-term implications), transit/vanpool benefits 

can be implemented and adjusted quickly. 

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Transit and Vanpool Benefits: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

Tax Considerations Transit/vanpool benefits may be provided tax-free to employees up to $105 per month. Tax benefits accrue to businesses 

Tax provisions that allow transit/vanpool benefits to be taken and employees whether the employer pays for the benefits or 

as a tax-free fringe benefit offer substantial financial savings the employee pays for it through a pre-tax salary deduction, 

for both employers and employees.4 as shown in Figure 1. 

Figure 1: Tax Savings for Employers and Employees 

Option 

$105/month to commute via transit 

Employer Tax Benefit Employee Tax Benefit 

Employers give their employees up to Employer saves payroll taxes (7.65%) Employee receives up to $105/month taxcompared to offering taxable salary. free. The employee does not pay any taxes 

or vanpool. on the value of the benefit. 

Employers allow employees to use Employer saves on payroll taxes (7.65% Employee saves on income tax and payroll 

pre-tax income to pay for transit. savings). No payroll taxes are paid on the taxes. The amount of income reserved for 

income that is reserved by the employee. transit/vanpooling (up to $105/month) is no 

longer treated as taxable salary. 

Employer-Paid Benefits 

If the employer pays for the transit/vanpool benefit, the value 

of the benefit is tax-free to the employee, as well as free of 

employer payroll taxes. As a result, providing transit/vanpool 

benefits is a low-cost way to provide employees with an additional benefit, and saves considerable money compared to an 

increase in taxable salary. 

For example, as shown in Figure 2, by providing a $105 per 

month ($1,260 per year) transit/vanpool benefit rather than 

an increase in salary, the employer saves $96.39 per year in 

payroll taxes ($1,260 times 7.65 percent FICA). 

Meanwhile, the employee saves about $487 in taxes compared to receiving taxable income (based on a 25 percent federal income tax, 6 percent state income tax, and 7.65 percent 

FICA). With taxable salary, over 40 percent of the salary 

increase is never seen by the employee. In contrast, the 

employee receives the full $1,260 per year ($105 per month) 

in transit/vanpool benefits paid by the employer. 

Note that some transit voucher providers charge an administrative fee for ordering the vouchers, which would slightly 

increase the cost to the employer. On the other hand, some 

transit agencies offer discounts for purchasing transit passes 

in bulk, which would lower the cost. Some states and localities also offer tax credits, further lowering the cost to the 

employer. The employee takes home the full $1,260 benefit, 

tax-free.5 To net an increase in after-tax income of $1,260 

would require a salary increase of over $2,050. 

Figure 2: Sample Tax Savings from Offering $1,260 

Commuter Benefit Rather than Salary 

$500 

$400 

$300 

$200 

$100 

$0 

Employer Savings Employee Savings 

State Income Taxes 

Federal Income Taxes 

Payroll Taxes 

Under federal tax law, an employee who pays to park at a 

qualified parking area (like a transit station) and then takes 

mass transit or a commuter highway vehicle to work can 

receive a combination of transit/vanpool and qualified parking benefits, up to a combined benefit of $305 per month 

($105 for the transit/vanpool benefit and $200 per month 

for parking) or a maximum of $3,660 per year. 

4 Employers should review with their tax advisor the tax implications for themselves and their employees. 

5 Some transit systems add value when fares are purchased in larger increments, resulting in a larger employee benefit. 

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Transit and Vanpool Benefits: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

Employee Pre-Tax Salary Deduction 

If the employer does not pay for the fringe benefit, but 

deducts the pass and/or parking cost from an employee’s pretax income: 

X The employer sees a reduction in payroll taxes. 

X The employee does not pay federal income, payroll, and 

possibly state income taxes on the deducted amount. 

Employers do not pay any payroll (FICA) taxes on the 

amount of income that is reserved by the employee from taxable income. FICA consists of Social Security and Medicare 

taxes paid on wages. For tax year 2004, employers and 

employees pay equal amounts: 6.2 percent of wages up to 

$87,900 per year per employee for Social Security and 1.45 

percent of total wages for Medicare (no salary limit). As a 

result, for every dollar that an employee reserves for a pre-tax 

transportation fringe benefit, the employer saves about $7.65 

(for employees making less than $87,900 per year).6 An 

employee who reserves $105 per month for transit or vanpools will save over $96 per year for the employer in reduced 

FICA taxes. If an employee reserved the full $205 per month 

for qualified parking, employer tax savings would be $183.60 

per year. 

Employees also receive substantial tax savings. An employee in 

the 25 percent federal tax bracket who reduces his or her pretax income by $105 per month to pay for transit or vanpooling expenses could save $315 per year in federal income taxes 

and an additional $96.39 in payroll taxes. Employees could 

also save on state income taxes that piggyback on the federal 

tax definitions of compensation. For example, in a state with a 

6 percent income tax, employees could save another $75.60 in 

taxes. In total, an employee could save $487 each year. This 

brings the real transit cost to the employee down from $105 

per month to $64.41 per month, a savings of 35 percent. 

As either a salary substitute or additional benefit, transit benefits provide more value for less money than cash. 

Some states tax transit benefits as regular income for employees. Employers should consult with their tax departments to 

review the tax treatment of transportation benefits, particularly if they operate in multiple states. 

Examples of Tax Benefits 

Detailed examples of how to calculate tax benefits are contained in a separate Benefit Brief–Commuter Tax Benefits. 

This briefing paper can be found on the BWC Web site. 

Employee Benefits 

Employee Cost Savings 

Employees who ride transit or use vanpools save money with 

these benefits. If the employer pays the full benefit, the 

employee's transportation expenses are considerably reduced. 

If the employee pays the benefits, s/he still receives a reduction in transportation costs, since the taxable salary is 

reduced by the amount of the benefit, thus resulting in a 

lower tax assessment. 

Increased Employee Satisfaction 

Employees view transit/vanpool benefits extremely favorably. 

Transit/vanpool benefits can: 

X Lower employee commute stress 

X Provide additional choices to employees 

X Heighten employee appreciation of employer 

X Help make benefits plans more employee friendly and 

environmentally friendly 

When Transit/Vanpool

Benefits Make Sense 

Any employer with a commuting workforce can offer 

transit/vanpool benefits. There are certain conditions, however, that make it easier or more beneficial for an employer to 

implement such programs. 

Locations with Access to Transit or High-Occupancy 

Vehicle Lanes 

Transit passes and vanpool programs can be implemented in 

all types of locations, including both urban and suburban 

areas. Transit programs, however, will generally be most effective in locations where transit options are readily available 

and with frequent service. These conditions are typically the 

case in central business districts and other dense urban areas, 

although certain suburban areas may also fit into this group. 

Vanpooling can work well in more suburban areas not well 

served by fixed route transit. The availability of high-occupancy vehicle (HOV) lanes and park-and-ride facilities make 

vanpooling more appealing to employees. 

6 For employees earning over $87,900 per year, there would be less savings to the employer because Social Security taxes are not paid on any salary above $87,900 

(in 2004; salary limits change annually). Medicare taxes have no salary limit. 

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Transit and Vanpool Benefits: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

Locations with Limited or Expensive Parking and 

Long Commutes 

Constrained parking tends to increase the desirability and 

improve the effectiveness of transit/vanpool benefits since 

employees may wish to avoid driving under these conditions. 

Employees with long commutes are often most interested in 

vanpooling since they can use the time that would have been 

spent driving more productively, or to rest or talk to coworkers. Such factors as employee work hours matching transit schedules and a supportive employer attitude toward vanpooling can also have important effects on the success of programs. (FHWA, 1993) 

Employers with Recruitment or Retention Issues 

In a tight labor market, employers can make themselves more 

attractive to employees by offering commuter benefits. 

Implementation

and Costs 

Employers must address various administrative issues in 

implementing a transit/vanpool benefits program. Although 

all employers must spend some staff time setting up the program, the larger the employer the more complex and potentially challenging the issues. Small and medium employers, 

especially those with only one worksite, tend to find these 

benefits fairly straightforward to implement and administer. 

Because transit/vanpool benefits are a tax-deductible business 

expense, they can often be provided at relatively little cost to 

an employee and with relatively little administrative burden. 

As noted earlier, implementing an employee “pre-tax” payroll 

deduction program can actually result in total tax bill reductions for a company, but this is not as valuable to employees. 

Fewer Administrative Requirements than Flexible 

Spending Accounts 

Transportation fringe benefit programs have considerably 

fewer administrative requirements than IRS Section 125 

Flexible Spending Accounts (FSAs) for health care and 

dependent care expenses. What sets transportation fringe 

benefits apart from other pre-tax programs like flexible 

spending accounts is the ease of use and exemption from the 

usual pre-tax program restrictions. There are no complicated 

plan filings or forms to fill out, no “use it or lose it” rules, no 

irrevocable elections, and no mandatory enrollment dates. 

In particular: 

X Nondiscrimination rules that apply to flexible spending 

accounts do not apply to transportation benefits. An 

employer can offer transportation benefits to any group of 

employees without concern about disproportionate use by 

the highly compensated. 

X Unlike FSAs, salary reduction elections do not need to be 

made before the beginning of the plan year. The employer 

may allow elections for transportation benefits to be made 

before any period during which the employee will receive 

the benefits. For example, an election period may be for a 

calendar month, providing greater flexibility for employees. 

X Unlike FSAs, transportation benefits are not subject to 

Form 5500 annual reporting. 

Costs and Corporate Cash Flow 

The primary cost of employer-based transit benefits programs is the contribution to the employee’s transit cost. 

Although providing transit/vanpool benefits costs a company 

less than providing additional salary (due to payroll tax savings), cash flow associated with purchasing transit passes or 

vouchers can be an issue for some companies. For example, 

some transit agencies and voucher providers recommend that 

employers purchase vouchers for three months at a time, 

rather than one. Although advance purchase may not be 

required, the voucher provider or transit agency may give 

financial incentives for advance purchase, such as lower shipping charges or automatic re-ordering. In addition, voucher 

providers generally charge a small administrative fee. 

Ongoing direct administrative costs tend to be small, 

depending upon the number of participating employees and 

the number of vouchers or passes distributed. According to 

David Judd, vice president of Commuter Check, internal 

research shows that for many small companies, administration takes only a few hours per month. (Judd, 2001) 

Although no written rules are required by tax law, a company 

will typically want to set up program administrative guidelines. The guidelines will address issues such as: How do 

employees elect the benefits? How often will voucher distribution take place? How often can employees change their 

pre-tax elections? Can an employee return the vouchers for 

taxable cash if they do not use them? Setting up program 

procedures often entails initial start-up time, but can ultimately save administrative costs by ensuring a clear, consistent set of procedures. 

Some employers may encounter payroll difficulties combining a partial employer-provided transit/vanpool subsidy with 

a pre-tax election. For example, at the University of 

California–Berkeley, staff and faculty are given a choice 

between reserving pre-tax salary to purchase transit/vanpool 

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Transit and Vanpool Benefits: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

passes and participating in the university’s subsidy program. 

Employees cannot combine the benefits. 

Distribution of Passes or Vouchers 

Logistics and security are important concerns with 

pass/voucher distribution. Transit passes and vouchers generally do not contain identifying characteristics that clearly 

show they belong to a specific person. As a result, the 

employer must match the transit vouchers they receive from 

the transit agency with the elections made by individual 

employees. The process can be further complicated if the 

employer payroll operation is centralized but facilities are 

spread throughout a region or the country. In general, distribution is probably a greater problem for large companies 

with multiple sites, and not much of a problem for small 

employers with a single site. 

Employers have responded in several ways. Some employers 

have employees pick up passes or vouchers in person from a 

designated contact person. Other employers send passes or 

vouchers directly to employees’ homes to simplify the process. 

Some employers use a cash reimbursement system to avoid 

having to distribute vouchers altogether; however, there are 

regulations specifying when cash reimbursement can be used, 

depending on whether vouchers are “readily available” 

(described further below). Some commercial services also offer 

a service in which they send passes or vouchers directly to 

employees’ homes, saving the employer distribution efforts; 

most often, a fee is charged for this service. There is no one 

best way–each employer must choose a solution that fits. 

Dealing with Multiple Transit Agencies 

Dealing with multiple transit systems can be a challenge for 

employers, whether the employer has multiple work sites or 

the region is served by several transit agencies. Within a 

given region, there may be dozens of individual transit systems, each with different types of transit passes. If an 

employer needs to distribute different kinds of passes to different employees, this can become a major task. 

There are several options for the employer interested in minimizing personnel staff time in program implementation, 

while handling different transit systems and vanpools. 

Although this section describes the types of programs available in a general way, see Appendix A for a list of programs 

arranged by city or region. 

X Regional Transit/Vanpool Vouchers: In most large metropolitan areas, regional transit vouchers are available, which 

are good for services on multiple transit agencies, including 

vanpools. These regional vouchers tend to come from 

either a large regional transit agency or a commercial 

voucher provider. 

✓ Vouchers from Transit Agencies: Many large metropolitan areas have simplified the process by creating 

regional transit vouchers that are good for services 

with multiple transit agencies, including vanpools. For 

example, in the Washington, DC metropolitan area, 

Metrocheks are available through the Washington 

Metropolitan Area Transit Authority (WMATA). 

Metrocheks are accepted by over 100 bus, rail, and 

vanpool services in the DC area. The employee either 

uses the Metrochek directly on Metrorail or trades the 

voucher in for a Metro bus pass, another local bus 

pass, commuter rail tickets, or vanpool pass. Many 

regional transit services also now have employer coordinators and special program materials for employers 

to make it easy for employers to start a program. 

Some transit agencies even provide discounts to 

employers who order in bulk. 

✓ Commercial Voucher Providers: In other metropolitan areas, the regional voucher is available from a 

commercial voucher provider. A commercial voucher 

provider serves as a middleman between employer and 

transit agencies, and a clearinghouse for transit agencies; the voucher provider offers transit passes that can 

be used on any transit system in the region. 

Three of the largest commercial voucher providers are: 

Commuter Check Services Corp., TransitCenter, and 

Work/Life Benefits. By using these voucher providers, 

the employer responsibility is limited to only the purchase and distribution of vouchers. The services typically charge an administrative fee. (Garvey, 2000) 

✓ Other Transit/Vanpool/Parking Benefit Services: In 

addition to these options, a commercial venture called 

WageWorks helps employers to set up a commuter 

benefit program that allows employers to order transit, 

vanpool, and parking vouchers online. An employer 

would set up an account with WageWorks. The 

employees order passes via the Internet and have them 

sent directly to their homes, without the employer 

having to worry about distributing vouchers. 

WageWorks charges an administrative fee. 

Using Cash Reimbursement 

Cash reimbursement may be used instead of transit/vanpool 

vouchers only if the voucher provider charges a fee that 

exceeds 1 percent of the average annual value of the vouchers 

(excluding per order delivery charges of under $15). 

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Transit and Vanpool Benefits: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

Employers cannot consider internal costs (e.g., distribution 

costs) to claim that vouchers are not readily available. 

Equity Issues 

For employers with multiple worksites, especially in different 

states, there may be equity issues to consider before implementing transit/vanpool benefits. Because transit fares vary 

so widely, giving the same dollar amount to employees in different locations (or even to those in the same location who 

use different means of transit) will result in different levels of 

coverage for employees’ transit needs. A $105 benefit would 

more than cover a $45 monthly bus pass (although the 

employee would not receive the additional $55 in cash), but 

commuter rail expenses could easily exceed $105 per month, 

in which case the employee would have to make up the difference. The other option is to pay a similar proportion of all 

employees’ commuting expenses, although any benefits over 

$105 would not be tax-free. There is no one correct 

approach to the issue, but employers served by a variety of 

transit agencies must take the issue into account. 

Guide to 

Implementation 

An employer would need to take a number of steps to implement a transit benefit program. The first two steps below 

would be the same for any employer; however, once an 

employer has decided whether to use a voucher system or a 

cash reimbursement system, the steps diverge. Both possibilities are presented below. 

Appendix B contains a flow chart to assist employers with 

decision-making about the various choices involved in implementing a transit/vanpool benefits program. 

1) Determine What Form of Transit/Vanpool Voucher Is 

Available for Your Location 

Many cities and regions already have transit voucher programs through which employers can purchase transit 

vouchers in bulk for their employees. The largest programs are listed in the Associations and Contacts section 

that follows, under “Regional and Local Transit Agencies 

and Other Contacts.” For regions not listed here, an 

employer should contact the local transit agency to determine whether they participate in such a program. At this 

early stage, employers should also determine how many 

different transit systems their employees use; in a small 

city, where all bus services are provided by a single agency, 

a program might function differently than in the San 

Francisco Bay Area, with over two dozen transit agencies. 

This may be a particular difficulty for multi-region 

employers, especially those whose offices are served by 

smaller agencies. 

2) Determine Whether to Use Voucher/Pass System or 

Cash Reimbursement System 

According to IRS regulations, a cash reimbursement system can be used only if a voucher provider charges a fee 

for providing the vouchers that exceeds 1 percent of the 

average cost of the vouchers. 

If the employer chooses to implement a voucher 

system, the following steps would apply: 

1) Contact Transit Pass or Voucher Provider 

After deciding to participate in a voucher program, the 

employer could contact a representative from the provider 

to review program, costs, and logistics. If there are multiple transit agencies, an employer should discuss how this 

might affect employees’ use of the program. Some voucher 

programs also offer the option of registering online. 

2) Determine How Voucher/Pass Program Will Operate 

Vouchers or passes may be used either for employees to 

purchase with pre-tax dollars or as an employer-paid benefit. Employers must decide which of these options better 

meets their needs. If the employer is paying for the benefit, it must also decide whether it will offer the full $100 

to all employees, or whether it will pay a certain percentage of costs. 

3) Obtain Senior Management Approval 

Senior management would need to approve this type of 

addition to existing benefits. Because the most effective 

programs in reducing solo driving are those that are supported by management, if one of the employer’s goals is to 

reduce the percentage of single-occupant vehicles, ongoing 

management support of the program is critical. 

4) Make Appropriate Changes to Payroll System 

If the program is designed to allow employees to purchase 

pre-tax vouchers, payroll procedures must be changed to 

reflect this new benefit. This may mean setting up new 

deduction codes, redesigning payroll forms, or working 

with a third-party payroll vendor to implement the 

change. An employer must also decide if benefits will be 

available at any time, or if employees will only be able to 

enroll during certain election times, and how employees 

will enroll (via printed forms, electronically, or through 

some other means). If there will be different denomina11

Transit and Vanpool Benefits: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

tions of transit vouchers available, this should be reflected 

in enrollment procedures. At this point, employers should 

also decide how vouchers or passes will be distributed—on 

a monthly, quarterly, or annual basis— and whether they 

will be mailed to employees or picked up at a central point 

at specified times. 

5) Enroll in Voucher or Pass Program 

Employers must enroll with the voucher or pass provider. 

Providers may have minimum order levels; they may also 

make recommendations as to how many vouchers or passes 

should be ordered (usually 5 percent above anticipated 

demand). It generally takes several weeks before the 

employer obtains the vouchers or passes. Employers should 

ensure that employees receive their vouchers or passes within a reasonable time after beginning to make deductions. 

In a voucher program, the employer should decide what 

denominations make sense. For example, if the main transit provider is a bus service, and a monthly pass costs $40, 

the employer would want to order both $10 and $30 

vouchers. A $30 voucher would leave the employee to pay 

the remaining $10, while two $30 vouchers would mean a 

waste of $20, since riders cannot redeem the extra voucher 

amount for cash. Voucher providers may have denominations specific to the city and transit agency. 

6) Publicize the Program to Employees 

Employers should communicate the new benefits to 

employees. Information about the benefits should also be 

incorporated into orientation sessions, company benefits 

literature and internal communications. 

7) Enroll Employees 

Once the benefit is set up and announced with a start date, 

the employer should be prepared for a large one-time 

influx of new enrollees. For onsite distribution, employers 

should arrange to have sufficient vouchers or passes on 

hand at the site, and ensure that personnel understand the 

distribution procedures. 

8) Set Up a System for Continuing Distribution 

Once the initial enrollment period has passed, employers 

should ensure that the system continues to operate 

smoothly. This includes continuing publicity of the program, monitoring program usage, ordering new vouchers 

or passes on a regular basis, and answering employee questions about the program. 

If the employer chooses to implement a cash reimbursement system, the following steps would apply: 

1) Determine How Cash Reimbursement Program Will 

Operate 

The employer must decide whether the program will operate as an employee-paid or an employer-paid program. An 

employee-paid reimbursement program operates like a 

flexible spending account, in which the employee reserves 

a specific amount of pre-tax money every month, up to 

$105. The employee then requests reimbursement, using 

these funds, for actual transit expenses incurred. An 

employer-paid program would allow employees to request 

reimbursement up to $105 per month from the employer. 

Both types of programs must meet IRS criteria about 

reimbursement; the employers must implement a "reasonable procedure" to ensure that the employee spent the 

money on qualified transit expenses. Also, the reimbursement program must operate on a reimbursement basis–the 

employer cannot reimburse an employee until an expense 

has actually been incurred. 

3) Obtain Senior Management Approval 

Senior management would need to approve this type of 

change in benefits. If the employer wants to reduce the 

percentage of single-occupant vehicles, ongoing management support of the program is critical. Even more important than management support is management participation–if senior level employees ride transit, employees will 

be more likely to believe that the company has a serious 

commitment to the program. 

4) Make Appropriate Changes to Payroll System 

If the program is designed to allow employees to reserve 

pre-tax funds to pay for transit, payroll procedures must 

be changed to reflect this new benefit. This may mean setting up new deduction codes, redesigning payroll forms, 

or working with a third-party payroll vendor to implement the change. If the program will be employer-paid, 

any reimbursement procedures the company already has in 

place will need to include transit reimbursements; this 

may require adding expense codes or enrolling employees 

who do not normally request expense reimbursements. An 

employer must also decide if benefits will be available at 

any time, or if employees will only be able to enroll during certain election times, and how employees will enroll 

(via printed forms, electronically, or through some other 

means). At this point, employers should also decide how 

often reimbursement will be distributed—on a monthly, 

quarterly, or annual basis—and how employees will sub12

Transit and Vanpool Benefits: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

mit claims for reimbursement (on paper or electronically, 

and whether receipts or copies of transit passes will be 

required). 

5)Publicize the Transit Cash Reimbursement Program to 

Employees 

Employers should communicate the new benefits to 

employees. Information about the benefits should also be 

incorporated into orientation sessions, company benefits 

literature, and internal communications. 

6)Enroll Employees 

Once the benefit is set up and announced with a start 

date, the employer should be prepared for a large, but onetime influx, of new enrollees, as well as the first batch of 

requests for reimbursement. 

7)Set Up a System for Continuing Cash Reimbursements 

Once the program has been implemented and any bugs 

worked out, the employer should ensure that the program 

continues to operate smoothly. This would include continuing publicity of the program, monitoring program usage, 

and answering employee questions about the program. 

Employer Questions

and Answers 

These questions might commonly be asked by an employer 

(e.g., a human resources administrator or business manager) 

considering a commuter benefits program. 

How difficult—and costly—is it to administer a transit/vanpool benefit program? 

A study of firms that have implemented transit pass programs generally found negligible implementation costs. The 

study found that transit programs are in many cases simple 

to organize and implement and that their ongoing administration poses no extra cost to the firm. Companies interviewed generally felt that the benefits of the program far outweighed the added administrative time necessary to implement the program and distribute vouchers. Some companies 

hire outside firms to deal with voucher purchase, distribution, and advertisement. Although these companies charge 

for their services, some companies have found that these 

extra costs can be less than actual tax savings for both programs where the employer provides vouchers and where 

employees pay with pre-tax income. (Litman, 1999) 

However, implementing programs also involve initial start-up 

costs in terms of staff time needed, which may fall heavily on 

the human resources section. In addition, some companies 

have found that the number of people who will be interested 

in receiving the benefits is too small to justify the time and 

effort involved. 

What are the cost implications of implementing transit/vanpool benefits for my company? 

The total financial effects of a benefits program will vary 

depending on the specific conditions of a company, including existing parking arrangements, location, transit availability, and current travel patterns of employees. If the benefit is 

paid by employees out of their pre-tax earnings, the employer 

will incur only administrative costs. If the employer pays for 

the benefit, costs will be substantially higher, based on the 

amount of the benefit and the number of employees who 

participate. In addition, the use of commercial transit voucher providers may entail an administration fee. If the employer 

pays for the benefit, the cost to the employers will be less 

than if the employers had increased employees’ salaries by an 

equivalent amount. If the employees pay for the benefits out 

of pre-tax income, the employer saves on payroll taxes. The 

payroll tax savings should generally offset the administration 

fees charged by commercial providers. It is important to note 

that many of the costs may be more than offset by other significant long-term cost savings. Employers interviewed in 

case studies consistently remarked that the transit benefits are 

an added fringe benefit that helps to recruit and retain 

employees: “It tips the scale in our favor when a recruit is 

comparing offerings of other companies to ours.” (Wells, 

1999) Moreover, by equalizing benefits, companies provide a 

more equitable compensation package for all their employees. 

Together, these features may help to reduce recruitment and 

retention costs for the company. In addition, for employees 

who personally support environmental goals, such benefits 

may make the company more attractive than one that simply 

offers free parking and does not address other commute 

modes. 

If I implement a transit/vanpool benefit program, am 

I required to offer the full value of $105 to my 

employee? 

No. An employer may provide benefits of any amount. 

What if a monthly pass costs $125 per month? Am I 

limited to providing a $105 benefit per month? 

No. An employer may provide transit/vanpool benefits of 

any amount. The tax-free benefit for transit/vanpool benefits, 

however, is currently limited to $105 per month. As a result, 

the employee and employer must pay taxes on the value of 

the benefit that exceeds the $105 statutory limit. For exam13

Transit and Vanpool Benefits: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

ple, if the employer provides the employee with a monthly 

pass valued at $125 per month, $105 is a tax-free fringe benefit, and the excess—$20—must be included in the employee’s wages for income and employment tax purposes. 

Similarly, if the employer offers a pre-tax salary deduction 

option, the employee may be allowed to purchase a pass with 

a value of more than $105 per month. Then, $105 per 

month will be deducted from the employee’s wages for 

income and employment tax purposes. The remaining cost 

will be included in taxable salary but be used by the employer to purchase the pass. 

Do transit passes need to be distributed on a 

monthly basis? What if I want to provide my 

employees with annual transit passes? 

Transit passes may be distributed up to 12 months in 

advance. In the case of a pass that is valid for more than one 

month, such as an annual pass, the value of the pass may be 

divided by the number of months for which it is valid to 

determine whether the value of the pass exceeds the statutory 

monthly limit. For example, an employer may provide 

employees with transit passes near the beginning of each calendar quarter for that calendar quarter. In this case, an 

employer may provide employees with transit passes with a 

value of $315 on March 31 for the calendar quarter covering 

the months April, May, and June. Since $300 is within the 

statutory limit (three months times $105 equals $315), the 

total value is excludable from the employees’ wages for 

income and employment tax purposes. 

How are benefits treated if an employee terminates 

employment and the transit passes cover multiple 

months? 

In general, the value of transit passes provided in advance to 

an employee for a month in which the individual is not an 

employee must be included in the employee’s wages for 

income tax purposes. Transit passes distributed in advance to 

an employee are excludable from wages for employment tax 

purposes if the employer distributes transit passes to the 

employee in advance for not more than three months. At the 

time the passes are distributed, there cannot be an established 

date that the employee’s employment will terminate (for 

example, if the employee has given notice of retirement) 

occurring before the beginning of the last month of the period for which the transit passes are provided. Assume the 

employer distributes transit passes quarterly, and the employee elects to have $315 deducted from salary to cover transit 

vouchers for April, May, and June. If employment terminates 

on May 31, and there was not an established date of termination at the time the transit passes were distributed, then 

the value of the transit passes provided for June ($105) is 

excludable from the employee’s wages for employment tax 

purposes. However, the value of the transit passes distributed 

for June ($105) is not excludable from wages for income tax 

purposes. If the employee’s termination date was established 

at the time the transit passes were provided, then the $105 is 

included in the employee’s wages for both income and 

employment tax purposes. 

Under what circumstances can an employer offer 

benefits in the form of cash payments rather than 

using transit vouchers or passes? 

The tax code states that transportation reimbursements must 

be made through vouchers or passes, rather than cash payments, unless the employer can show that vouchers or passes 

are not “readily available.” The January, 2001 IRS regulations 

define the term “readily available” by stating that only fees 

charged by transit voucher providers, and non-financial 

restrictions on vouchers, could be considered in making a 

determination of voucher availability, not internal administrative costs. Passes are to be considered readily available if an 

employer can obtain a pass on terms no less favorable than 

those available to an individual employee, as long as the 

voucher provider does not charge a fee in excess of 1 percent 

of the average monthly value of the voucher. 

In making a determination of voucher availability, employers 

cannot consider internal costs, but can include non-financial 

restrictions, such as whether there are reasonable advance 

purchase and minimum purchase requirements and whether 

vouchers can be purchased in appropriate denominations. 

(Federal Register, 2001) Internal administrative costs that 

cannot be considered in determining voucher availability 

include expenses incurred by the employer to distribute the 

vouches (i.e., if the employer chooses to mail vouchers to 

employees, the postal fee cannot be considered), any additional security measures that must be taken to safeguard the 

vouchers, and expenses incurred to advertise the provision of 

transit vouchers. Non-financial restrictions that can be taken 

into consideration include the following: if a voucher 

provider does not make vouchers available for purchase at 

reasonable intervals, or if a voucher provider fails to provide 

vouchers within a reasonable period after receiving payment 

for the voucher. 

Must a qualified transportation fringe benefit plan be 

in writing? 

No. The Internal Revenue Code does not require that a 

transportation fringe benefit be in writing. However, a company may wish to have certain rules and procedures written 

in order to answer employee questions. 

14

Transit and Vanpool Benefits: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

What are the benefits and downsides of using a 

commercial voucher provider? 

Commercial voucher providers can greatly simplify the 

process of implementing a transit voucher program. 

X Fewer Administrative Requirements Compared to Cash 

Reimbursement. Because vouchers can be ordered in 

bulk, and are generally valid for many months, an 

employer can order several times per year, instead of processing many reimbursements every month. Commercial 

voucher providers can set up automatic reminders about 

reordering. Using a voucher system reduces both the 

human resources department and employees’ administrative requirements, because they do not have to file for 

reimbursement or handle reimbursement requests. Once 

the employee has received the voucher, the employer’s 

tasks are completed. 

X Simpler Relations with Transit Agencies. In areas with 

multiple transit agencies, employees can generally use 

vouchers at any provider. Employers do not have to purchase passes from multiple agencies. 

X Customer Friendly. An account representative may provide a human resources employee with valuable experience 

about expected employee response to vouchers. 

X Easier for Multi-State Employers. Employers with locations in two or more states may choose to use commercial 

voucher providers because of the time and effort involved 

in administering the program in different states. The main 

downside is that commercial voucher providers change an 

administration fee equal to several percent of the total cost 

of the vouchers supplied. The more employees that enroll, 

the more expensive the service becomes on an absolute 

basis. 

What is a vanpool? 

A vanpool operates like a mini-transit service, with an organized route, schedule and passenger fare charges. Vanpools are 

comprised of at least six people, plus a driver, and fares 

depend on the commute distance, the total number of riders, 

the type of van, company-provided equipment, and incentives 

or subsidies. Vanpooling tends to appeal particularly to longdistance commuters who can reduce their commute costs and 

get to work in a stress-free way by sharing the ride with others. Typically, the vanpool driver rides free in exchange for 

driving, collecting fares, and managing maintenance for the 

van. Vanpools can be either employer-sponsored, use thirdparty leases, or be owner-operated. More information on vanpools is contained in a separate briefing paper. 

Does an employer need to operate a vanpool to provide vanpool benefits? 

No. An employer does not need to own or lease the vans in 

order to provide a vanpool benefit to employees. 

What are the best ways to promote a transit/vanpool 

benefit program? 

An employer has numerous options to inform employees 

about the benefits. Some of the more frequent methods 

include, but are not limited to, the following: 

X Company orientation meetings for new employees 

X Advertisements in places seen frequently by employees 

(e.g., cafeteria, garage, elevators) 

X Distribution of program brochures 

X Company newsletters 

X Voicemail or e-mail broadcast 

X Special promotional days (e.g., a "Pool Day" to encourage 

carpooling and vanpooling) 

X Awards or prize drawings to recognize employees using 

transit or carpools 

X Inserts to paychecks 

X Company Web site or Intranet 

Do any state or local governments offer any incentives for doing this? 

Yes. Several states offer tax incentives for providing 

transit/vanpool benefits. Maryland offers a 50 percent tax 

credit up to $30 per employee per month for costs associated 

with providing transit/vanpool benefits to employees. 

Minnesota provides a tax credit equal to 30 percent of the 

difference between what the employer pays for transit/vanpool passes and what employees are charged for the passes. 

Georgia offers a $25 tax credit for each employee receiving a 

transportation fringe benefit, as long as the tax credit does 

not exceed the amount of money spent on the program. 

Other states, including Delaware, Connecticut, New Jersey, 

and Oregon, offer tax credits to eligible companies that 

implement commuter transportation benefit plans, which 

could include transit/vanpool benefits. State tax credits may 

reduce the amount of federal tax savings, due to smaller federal deductions for state taxes. Employers should discuss state 

tax credit implications with a qualified tax advisor. More 

detailed information on state tax credits is contained in a 

separate briefing paper, Commuter Tax Benefits. 

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Transit and Vanpool Benefits: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

Employer Case Studies 

Both public and private sector employers have implemented 

successful programs across the United States. Following are 

examples of employers that have implemented commuter 

pass programs of varying scales. 

Seattle, Washington—Minor & James Medical Clinic 

Minor & James Medical Clinic in Seattle provides all of its 

employees with an Annual Flex Pass, which is good for 

unlimited free transit rides in King County, Washington. The 

Annual Flex Pass provides the approximately 340 employees 

of the clinic with free transportation to work using public 

transportation. According to Joann Wray, the human 

resources and transportation director, the Annual Flex Pass is 

greatly appreciated by employees. The pass normally retails at 

a cost of $1,746. The program has been in effect since 1997, 

and about 80 percent of the employees (275 out of 340) take 

transit to work each day. No parking is provided at the clinic, 

except for employees who were grandfathered into the program (about 100), and those that are required to work late 

night hours. Employees like the pass program because it 

allows them to commute to work for free. Part of what 

makes the program successful is an emergency ride home 

program that is paid for by the clinic. The emergency ride 

home program offers employees the ability to take transit to 

work with the security of knowing that they will be able to 

get home quickly in the event of an emergency or special circumstance. (Wray, 2001) 

Boston, Massachusetts 

A Boston-based Internet startup with about 70 employees 

gives its employees free passes to use in the Boston subway 

system. Management’s primary goal is to keep the benefits 

free even as the firm grows to an anticipated 100 employees 

in the months ahead. The company reports that the program 

has been very well received and is one tool among many to 

attract high-quality employees. The pass “really excites people” because it is something tangible they can use right away. 

To compete, the company wants to make it as easy as possible for employees to commute and avoid parking expenses, 

which can add up to more than $300 a month in downtown 

Boston. (Garvey, 2000) 

Chicago, Illinois—General Growth Properties 

General Growth Properties, a Chicago-based company that 

manages shopping malls across the country, allows employees 

to take a payroll deduction of pre-tax dollars to be used for 

transit vouchers, rather than providing a direct benefit. 

About 250 of the company’s 500 headquarters employees 

have enrolled in the program managed by General Growth’s 

payroll/accounting department. Given that the company’s 

payroll is handled in-house, the program managers feel that 

administration of the program on an ongoing basis takes very 

little extra effort. Setting a limit on when employees can opt 

in or out of the program makes the program more manageable. Allowing monthly enrollment or other changes would 

be difficult from an administrative perspective, so General 

Growth’s program limits changes to once a quarter. Under 

the company’s program, General Growth purchases transit 

vouchers that cover a broad base of the Regional Transit 

Authority/Chicago Transit Authority’s mass transportation 

options. The vouchers are in different denominations, made 

out to General Growth and can be used to pay for transportation on any part of the regional system. Vouchers are 

distributed to employees once a month through the company's security desk. Those enrolled in the plan must show 

identification and sign for the vouchers. The company does 

not offer any form of parking benefit. 

Portland, Oregon—Intel Corporation 

Intel Corporation, with major offices in Arizona, Washington, 

California, and Oregon, offers a wide range of transit benefits 

to employees. At its Santa Clara facility, employees receive free 

Ecopasses for the Valley Transportation Authority light rail 

system, as well as $30 per month in subsidized metro/bus 

passes. In Portland, Intel Corporation bought annual bus and 

light-rail passes from Tri-Met, the local transit authority, at a 

discounted price. The company received the discount by purchasing passes for all eligible members of its work force. The 

corporation purchased 10,400 passes and will provide them 

free of charge to all employees. Under the state’s new commute-reduction law, businesses that provide transit passes for 

their employees receive a 35 percent state tax deduction. 

According to a 1999 report, 40 percent of Intel’s workforce in 

Arizona and Washington were using community methods 

other than driving alone to work, as were 32 percent of 

California employees. 

Atlanta, Georgia—Georgia Power– A Southern 

Company 

Between 1997 and 1999, Georgia Power/Southern Company 

instituted a series of commuter benefits designed to allow 

their employees to assist in reducing Atlanta’s worsening air 

pollution. One benefit gives employees monthly subsidies for 

transit, shuttles, or vanpools. In addition, to encourage rail 

ridership, the company beefed up its MARTA shuttle operations, shortening headways to 10 minutes or less throughout 

the day. Use of alternative commute modes increased from 

300 employees in 1997 to 1,500 employees in 2000, or from 

10 percent to 50 percent of all employees. Ridership on the 

MARTA shuttle was at 11,000 boardings per month in June 

16

Transit and Vanpool Benefits: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

2000, up from 6,000 per month in 1997. 

Milwaukee, Wisconsin—University of Wisconsin 

The UPASS transit pass program at The University of 

Wisconsin–Milwaukee (UWM) is an innovative transit program developed by the university and the Milwaukee County 

Transit System (MCTS) in which all UWM students receive 

an unlimited transit pass as part of their tuition. The pass 

can be used anytime, anywhere, for any trip purpose 

throughout Milwaukee County without any additional fare 

required. Program findings indicate that UPASS has been 

effective in reducing vehicle trips, increasing transit ridership, 

and reducing the impact of the automobile on the environment. The UPASS program has influenced modal shifts. 

Students who drive to UWM declined from a rate of 54 percent prior to UPASS to a rate between 38 percent to 41 percent after the implementation of UPASS. Students choosing 

to ride MCTS increased from 12 percent prior to UPASS to 

a rate of 25 percent to 26 percent since the implementation 

of UPASS. The UPASS program has also increased transit 

ridership for trips to work, to shopping, and to other locations. Transit mode split for work trips by survey respondents 

showed nearly a doubling over pre-UPASS semesters from a 

rate of 8 percent to approximately 15 percent. Surveys indicate a 17 percent to 18 percent increase in transit ridership 

for these trip purposes compared to pre-UPASS ridership. 

MCTS on-board ridership counts indicate express service to 

UWM showed a 75 percent to 136 percent increase compared to ridership counts conducted prior to the UPASS program. The UPASS program reduced vehicle trips to the university, which resulted in a reduction in emissions, fuel consumption, and student dollar savings. The UPASS program 

resulted in 221,055 fewer vehicle-trips made to UWM during the 1994–1995 academic school year. 

Bethesda, Maryland—Calvert Group 

The Calvert Group, a socially responsible investment fund 

located in suburban Washington, DC, offers a commuter 

benefits program to cover every potential mode, including 

walking and bicycling. Although Calvert subsidizes employees who drive at a rate of $75/month, persons who ride transit are reimbursed the full value of the transit costs, regardless 

of provider. Employee turnover dropped from 25 percent to 

12 percent after implementation of the program, and Calvert 

management sees the plan as integral to its recruitment and 

morale. The company has gained national attention for the 

quality of its employee programs in national publications 7 such as Business Week and Working Mothers Magazine. 

Los Angeles, California—Transamerica Life 

Companies 

Transamerica Life Companies, an insurance company with 

approximately 1,000 employees, is located just south of 

downtown Los Angeles. Los Angeles area companies with 

over 250 employees are mandated by the South Coast Air 

Quality Management District to institute trip reduction programs. Transamerica Life’s commuter program, which developed over a period of 13 years, includes a vanpool program 

(leased vans; maintenance, insurance, and administration 

provided), free parking for vanpools and parking discount for 

carpools, and a 50 percent transit subsidy (up to 

$65/month). Employees can purchase transit passes onsite; 

the Transportation Coordinator sends down a list of participants to the store, and the employee pays the balance of the 

amount. The company supports these financial elements 

with a guaranteed ride home program, emergency use of 

company cars, work hours flexibility, and bike racks and 

shower/locker facilities. As a result of these measures, approximately 500 employees participate in the transit pass program, and an additional 175 use carpools or vanpools. 

(FHWA, 1993; Corona, 2001) 

Minneapolis, Minnesota—American Express 

In 1998, American Express, a major financial services company, became the first Twin Cities employer to take advantage 

of the Metropass program offered by regional bus service 

provider Metro Transit. The program allows employers with 

over 100 employees to obtain reduced-cost monthly bus 

passes for their employees. For the first year, American 

Express paid Metro Transit $1.8 million, based on an estimate of the number of employees who would ride the bus. 

Employees could then purchase monthly bus passes for $25 

pre-tax, a significant savings over the usual price of $76. 

Employees received photo bus passes to reduce the risk of 

fraud. Of the company’s 6,000 employees in Minneapolis, 

approximately 70 percent use the program. (Pietsch, 2001; 

U.S. EPA Commuter Choice Case Studies) 

Services That Support 

Implementation 

Local Governments and Transit Agencies 

Many regional and local government entities provide services 

to help employers implement commuter benefit programs. 

Transit agencies, metropolitan planning organizations 

(MPOs), city and county transportation agencies, transportation management associations (TMAs), and transportation 

management organizations (TMOs) throughout the United 

7 Example from: www.bwc.gov/employ/csparking.htm. 

17 
Transit and Vanpool Benefits: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

States provide assistance to employers in starting and maintaining transportation demand management programs like 

transit passes and vanpools. They often provide information 

to employers about options to reduce driving to work, implementation issues, and local programs that support employer 

initiatives. Transit agencies often allow employers to purchase 

deeply discounted transit passes for their employees in an 

effort to boost ridership and meet environmental goals. 

Employers that take advantage of these programs should be 

aware that transit pass costs may rise after a year or two and 

plan accordingly. One potential solution to this problem 

might be for a company to carry the cost of transit passes for 

the initial years, and then share costs with employees later on. 

Supporting Services—Emergency Rides Home and 

Information Provision 

One of the barriers that prevents some employees from taking transit or a vanpool to work is the fear that they will not 

be able to get home quickly in the event of an personal emergency, such as picking up a sick child from school or working 

unscheduled overtime. Emergency or guaranteed ride home 

(ERH) programs provide commuters who regularly carpool, 

vanpool, bike, walk, or take transit to work with a reliable 

ride home when an unexpected emergency arises. Knowing 

there is a guaranteed ride home gives employees the security 

to take commuting options like transit and carpools with 

confidence. 

ERH programs may be established by individual employers; 

usually the employer will pay for a taxi home in case an 

employee who takes transit or a vanpool needs to go home at 

a time when transit services are not available or without the 

vanpool. Some MPOs and local governments have also established regional or county-wide ERH programs for employees 

that register for the program. ERH programs tend to be lowcost ways to encourage transit use, especially if a company 

only “fills in” coverage for areas not covered under a broader 

regional program. For example, a regional transit agency may 

provide an emergency ride home for monthly passholders, so 

a company would have to provide ERH only for carpoolers. 

Employers can also support transit and vanpooling by providing information on these options to their employees. A 

bulletin board or display with transit route maps and schedules can often be put up in a human resources office, lounge 

area, or hallway. Employers can also send periodic reminders 

to their employees about the availability of benefits through 

company voicemail or email systems, company newsletters, 

or an awards program designed to recognize alternative commuters. A supportive attitude toward transit and vanpooling 

can also help. Supervisors should recognize their vanpoolers’ 

schedule; for example, they should not hold late meetings 

that would require employees to miss their vanpool. 

Associations and 

Contacts 

This section includes information on experts that employers 

might wish to utilize for expertise in understanding, promoting, or providing technical information on transit/vanpool 

benefits. (Employers seeking information on implementing 

vanpool programs should consult the separate briefing paper 

on vanpool programs.) Individual employers are directed to 

contact their local MPOs, transit agencies, TMAs/TMOs, or 

other groups that provide services to support transit/vanpool 

benefit implementation. 

Regional and Local Transit Agency and Government 

Contacts 

Many transit agencies, MPOs, and state and local transportation agencies have programs to support transit/vanpool benefits. An extensive list of regional programs is provided in 

Appendix A, Regional Transit Benefits Programs. If an area is 

not listed in Appendix A, the MPO for the region may offer 

more assistance on locating rideshare programs. The appropriate MPO can be located through the Association for 

Metropolitan Planning Organizations (202-296-7051); a list 

of MPOs with Web pages is available at 

<www.ampo.org/links/mposnet.html>. 

Transit/Vanpool Voucher Providers and Other 

Services (Regional and National) 

The following commercial voucher providers sell transit/vanpool vouchers to employers. Depending on the provider, 

vouchers may be available for multiple regions. These contacts include: 

Transit/Vanpool Voucher Providers 

Accor Services North America (Work | Life Benefits) 

25115 Avenue Stanford, Suite 200 

Valencia, CA 91355-4582 

661-775-2200 

www.wlb.com/En/index.asp 

Commuter Check Services, Corp. 

David Judd, Vice President of Marketing 

401 S. Van Brunt Street 

Engelwood, NJ 07631 

201-833-9700, Fax: 201-833-8704 

www.commutercheck.com 

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Transit and Vanpool Benefits: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

TransitCenter 

2901 Sidco Drive 

Nashville, TN 37204 

800-945-CHEK 

inquiries@transitcenter.com 

www.transitcenter.com 

SM 

SM , 

—

—

—

Best Workplaces for Commuters

For more information on Best Workplaces for Commuters

contact the program’s information request line at 888 856-3131, 

or visit <www.bwc.gov>. 

Information on Tax Considerations 

The Internal Revenue Code that governs employer-provided 

commuter benefits is found at 26 USC Section 132(f ), and is 

available on the Web at: <uscode.house.gov/usc.htm> or 

<tmi.cob.fsu.edu/act/f_benefit.htm> 

For more information relating to qualified transportation fringes 

in Section 132(f ), visit the Internal Revenue Service (IRS) Web 

site at <www.irs.gov>. This site contains useful information for 

employers regarding the tax treatment of fringe benefits. Some 

publications available from the IRS that may be useful include: 

Publication 15a, Employer’s Supplemental Tax Guide— 

Section 6. Employee Fringe Benefits 

www.irs.gov/pub/irs-pdf/p15b.pdf 

Publication 15b, Employer’s Tax Guide to Fringe Benefits 

—Transportation (Commuting) Benefits 

www.irs.gov/pub/irs-pdf/p15b.pdf 

Final Regulation Concerning Qualified Transportation 

(Commuting) Fringe Benefits (Issued January 11, 2001) 

frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname= 

2001_register&docid=01-294-filed.pdf 

For more information relating to qualified commuter benefits in 

Section 132(f ), send a written request to: 

Freedom of Information Reading Room 

PO Box 795, Ben Franklin Station, 

Washington DC, 20044; 

or contact Patricia Holtzman at the IRS at 202-622-6040. 

VPSI 

CommuterBucks Program 

1220 Rankin Street 

Troy, MI 48083-6004 

800-826-7433, Fax: 810-597-3501 

www.vpsiinc.com 

Other Services 

WageWorks Inc. 

Sheila Villaroman 

400 South El Camino Real, Suite 600 

San Mateo, CA 94402-1705 

Tel: 650-373-2900, Fax: 650-373-2919 

www.wageworks.com 

Emissions and 

Transportation Benefits 

Transportation benefits can be an effective means of reducing 

vehicle travel and associated emissions of air pollutants and 

greenhouse gases, traffic congestion, and parking problems. 

Vehicle Trips 

Transit pass programs typically produce substantial shifts away 

from driving to work alone. Studies of programs in New York 

City, Philadelphia, and San Francisco found an increase in 

employee transit use for both commuting and non-work trips 

among those receiving employer-provided transit benefits.8 

On average, employees receiving benefits took 1.7 to 3.2 new 

transit trips per week, as shown in the following table. (US 

DOT, 1995; Metropolitan Transportation Commission) 

Although most of the employees taking transit benefits 

already commuted by transit, the surveys suggest that most of 

the users who increased transit use were previously non-users 

or infrequent users of transit, and remain irregular users.9 The 

largest increases in transit use appear to be in suburban areas, 

where existing transit share is lower than urban areas. For 

example, in the Bay Area study, the average increase was 3.03 

new transit trips for employees working in San Francisco and 

3.74 new transit trips per week for employees working out8 Metropolitan Transportation Commission. Impact of the Bay Area Commuter Check Program: Results of Employee Survey. Oakland, California. U.S. 

Department of Transportation, Federal Transit Administration. TransitChek in the New York City and Philadelphia Areas. Prepared by Research and Special 

Programs Administration. Final Report. October 1995. 

9 It is not clear to what extent the level of the subsidy affects the number of new transit trips. One would expect that a higher subsidy would yield greater transit 

use. The San Francisco study, however, suggests that the level of the transit subsidy has little bearing on the transit ridership effect. No correlation was found 

between the amount of subsidy received and the number of new transit trips. The 1994 New York survey, however, found that employees receiving $31 or more 

per month took on average over three times as may additional trips as those receiving $30 or less per month. A comparison of the three New York surveys reveals 

that the increase in transit commute trips did not change much over time (about 1.1 to 1.2 new transit trips per week), even though the average subsidy in 1994 

was about three times as high as in 1990. However, the number of new non-work trips was significantly higher per recipient in 1994, suggesting that the higher 

subsidy induces more transit trips for non-work purposes. 

19

Transit and Vanpool Benefits: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

Figure 3: Change in Transit Use Due to Employer-Provided Transit Benefits 

Region 

San Francisco Bay Area 

Type of Trip 

Commute 

% Employees 

Reporting Increased 

Transit Use 

34% 

Average Increase 

in Transit Trips Per 

Week Per Employee 

(Among Employees 

Receiving Benefit) 

2.05 

Non-work 29% 1.19 

Total Trips N/A 3.24 

Philadelphia Total Trips N/A 2.5 

New York Commute 11–23% 1.1–1.2 

Non-work 14–22% 0.55–1.7 

Total Trips N/A 1.7–2.9 

side of San Francisco. Correspondingly, the reason the average increase in transit trips was lower in New York than in 

other regions might be due to New York’s already high transit 

share. In the surveys where respondents were asked about 

their vehicle use, the percent of respondents reporting a 

decrease in vehicle/taxi use was nearly equivalent to the percent reporting an increase in transit use. These findings suggest that new transit trips are associated with a reduction in 

driving trips. Other studies of transit pass programs at individual employers confirm the effects of these programs at 

reducing vehicle travel. The extensive U-PASS transportation 

benefit program at the University of Washington (UW) produced remarkable impacts in a short time: 

On September 30, 1991, UW, in cooperation with the 

Municipality of Metropolitan Seattle, implemented U-PASS, 

one of the most comprehensive transportation demand management programs in the United States. The U-PASS program was developed in response to campus and community 

concerns for trip reduction and improved commuter services 

in view of possible impacts from planned campus development. The U-PASS program is a flexible package of transportation benefits offered through a pass that allows UW students, faculty, and staff to choose from a variety of commuting options at a greatly reduced price. After one year of operation,...[v]ehicle trips to campus are down 16 percent, parking lot use has decreased from 91 percent to 78 percent, 

transit ridership is up 35 percent, carpools have increased 21 

percent and the number of vanpools grew from 8 to 20 in 

less than 9 months. (William and Petrait, 1993) 

These gains have persisted over time; between 1990 and 

1999, total UW-Seattle ridership grew to 7.2 million trips 

annually, a 68 percent increase. In the latest (1998) survey, 

only 25 percent of commuters to campus drove alone, a 

remarkable accomplishment over a period in which single 

occupancy vehicle mode share has risen nationwide. 

(University of Washington, 1999) The identically named 

program at the University of Wisconsin was similarly successful, moving an estimated 221,055 vehicle trips to transit during the 1994–1995 academic year. (Meyer and Beimborn, 

1998) 

Emissions 

Reducing vehicle miles traveled (VMT) reduces vehicle emissions. The University of Wisconsin U-PASS program found a 

20 percent reduction in emissions for trips to the university. 

(Meyer and Beimborn, 1998) Emissions reductions will generally track reductions in VMT, although if employees drive 

and then park-and-ride at transit stations, their cold-start 

emissions will cut into the emissions benefits. 

20

Transit and Vanpool Benefits: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

References and 

Publications 

Association for Commuter Transportation. “Tax Benefits,” 

available at <www.ACTweb.org>. 

Association for Commuter Transportation. “TDM Tool Kit.” 

Bullard, D.L. 1988. Evaluation of Employer Distributed 

Transit Pass Programs in Texas. Texas Transportation 

Institute. College Station, TX. 

Duff, S. 1999. “New benefits address the heavy toll of commuting.” Employee Benefit News, v13, n9, p157. August. 

Federal Highway Administration. 1993. A Guidance Manual 

for Implementing Effective Employer-Based Travel Demand 

Management Programs. available at 

<www.bts.gov/ntl/DOCS/474.html>. 

Federal Transit Administration. 1999. “Commuter Choice 

Toolkit.” 66 Fed. Reg. 2241 (January 11, 2001). 

Garvey, C. 2000. “Steer Worker (administering tax-advantaged commuting benefits).” HRMagazine v45, n8, p99. 

August. 

Hevener, M.B. and M.G. Dyson. “Easy new payroll tax savings from employee-paid parking and transit benefits.” Tax 

Executive v52, n2, p115. March. International Council for 

Local Environmental Initiatives (ICLEI). Available at 

<www.iclei.org/us/cashout/>. 

Judd, David. 2001. Personal communication. Telephone conversation between David Judd, Vice President, Commuter 

Check, and Liisa Ecola, ICF Consulting, April 6, 2001. 

Krechmer, D., F. Spielberg, and V. Milione. 1982. 

“Evaluation of employer-based transit pass programs.” 

Transportation Research Record issue 857, p58. 

Litman, T. 1999. Evaluating Public Transit Benefits and Costs. 

prepared for Victoria Transport Policy Institute. January. 

Metropolitan Transportation Commission. Undated. Impact 

of the Bay Area Commuter Check Program: Results of Employee 

Survey. Oakland, California. 

Meyer J. and E. Beimborn. 1996. Evaluation of an Innovative 

Transit Pass Program: the UPASS. March. Available at 

<www.uwm.edu/Dept/CUTS/upassum.htm>. 

Pietsch, B. 2001. Personal communication. Telephone conversation between Brian Pietsch, Director of Government 

Relations/Public Policy Affairs, American Express, and Liisa 

Ecola, ICF Consulting, February 23, 2001. 

PR Newswire Association. 1999. “Tax savings for commuters 

boost transit pass sales.” PRNewswire, v6915, August. 

U.S. Department of Transportation, Federal Transit 

Administration. Available at <www.fta.dot.gov/>. 

U.S. Department of Transportation, Federal Transit 

Administration. 1995. TransitChek in the New York City and 

Philadelphia Areas. Prepared by Research and Special 

Programs Administration. Final Report. October. 

U.S. Environmental Protection Agency. Employer Provided 

Benefits. Available at <www.bwc.gov>. 

U.S. Environmental Protection Agency. 1998. Protocol 

Development Guidance: Using Emission Reductions from 

Commuter Choice Programs to Meet Clean Air Act 

Requirements. June. 

U.S. Environmental Protection Agency. No Date. Best 

Workplaces for Commuters Case Studies. 

University of Washington. 1999. U-PASS Annual Report, 

September 1998-September 1999. 

Victoria Transport Policy Institute. TDM Encyclopedia: 

Employee Financial Incentives. Available at <www.vtpi.org>. 

Wray, J. 2001. Personal Communication. Telephone 

Conversation between Joann Wray, HR Director and 

Transportation Director of Minor & James Medical Clinic 

and Michael Grant of ICF Consulting, January 29, 2001. 

Wells, S.J. 1999. “Using rush hour to your advantage: offering commuting benefits.” HRMagazine. v44, no.3, p.26-32. 

March. 

Williams, M.E. and K.L. Petrait. 1993. “U-PASS: A Model 

Transportation Management Program That Works,” in 

Transportation Research Record No. 1404, Transportation 

System Management, Parking, and Travel Demand 

Management, Washington: Transportation Research Board of 

the National Academy Press. 

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Transit and Vanpool Benefits: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

Appendix A:


Regional Transit Benefits Programs


The chart below lists regional transit benefits programs (either pass or voucher programs). Employers located in areas not listed below should contact the MPO for their region to determine if others exist. 

Location Program Type of Telephone Web Site 

Name Program 

Albuquerque, NM ACT Now (505) 243-RIDE www.cabq.gov/transit/actinfo.html 

Atlanta, GA TransCard Discount Pass (404) 848-5000 www.itsmarta.com/howto/fares.htm 

Austin, TX Commute Solutions (512) 389-7400 www.capmetro.org/_2003/special_features/commute_sol.asp 

Baltimore, MD Metrocheks & MTA Voucher (410) 767-8755 www.mtamaryland.com/fares/metrocheck.cfm 

Commuter Choice 

MD Vouchers 

Boston, MA Commuter Check Voucher (800) 727-9436 www.commutercheck.com/cities/boston.html 

MBTA Corporate Pass (877) 927-7277 www.mbta.com 

Pass Program 

Boulder, CO ECO Pass Discount Pass (303) 441-3266 www.ci.boulder.co.us/goboulder/html/transit/eco_pass 

Bremerton, WA Discount Pass (360) 377-2877 www.kitsaptransit.org 

Buffalo, NY Commuter Check Voucher (800) 727-9436 www.commutercheck.com/cities/buffalo.html 

Chicago, IL RTA/CTA Transit Voucher (800) 531-2828 www.rtachicago.com/infocenter/transitcheck.asp 

Benefit Program 

Cleveland, OH Commuter Advantage Discount Pass (216) 566-5100 www.gcrta.org/commutea.asp 

Program 

Columbus, OH Pass Programs DiscountPass/ (614) 275-5839 www.cota.com/COTA/Cotaweb/main.xml?intPageID= 

Voucher 24&intSectionID=2&SubSubMenu=1 

Connecticut Deduct-A-Ride Voucher (888) 399-9323 www.deductaride.com 

(statewide) 

Dallas, TX DART Employer (214) 747-7433 www.dart.org/riding.asp?zeon=commuterchoice 

Services 

Denver, CO ECO Pass Discount Pass (303) 299-2122 www.rtd-denver.com/FaresAndPasses/Passes/ 

Eco_Pass/index.html 

Commuter Check Voucher (800) 727-9436 www.commutercheck.com/cities/denver.html 

Des Moines, IA Employer Support Discount Pass (515) 283-8111 www.dmmta.com/programs_employer.html 

Program 

Detroit, MI TransitChek Voucher (313) 223-2100 

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Transit and Vanpool Benefits: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

Location Program Type of Telephone Web Site 

Name Program 

Fort Worth, TX E Pass Discount Pass (817) 215-8700 www.the-t.com/epass.html 

Harrisburg, PA Commuter Benefit Voucher (717) 238-8304 www.cattransit.com 

Program 

Honolulu, HI Bonus! Program Discount Pass (808) 848-4500 www.thebus.org/Info/thebustaxsavings.asp 

Houston, TX METRO Ride Discount Pass (713) 739-4000 www.hou-metro.harris.tx.us/services/options/options01.asp 

Sponsors 

Kansas City, MO Employer Pass Discount Pass (816) 346-0274 www.kcata.org/trip_program.html 

Program 

Los Angeles/ TransitChek Voucher (800) 727-9436 www.132national.com/prog_losangeles.html 

Southern, CA 

Louisville, KY Commuter Check Voucher (800) 727-9436 www.commutercheck.com/cities/louisville.html 

Madison, WI Commuter Choice Discount Pass (608) 266-4904 www.ci.madison.wi.us/metro/ 

Program 

Miami, FL Corporate Metropass Pass (305) 884- 7567 http://www.miamidade.gov/transit/passes.asp 

Program #corporate_metropass_program 

Milwaukee, WI Commuter Value Discount Pass (414) 343-1777 www.ridemcts.com/services/business/value_pass.asp 

Pass 

Minneapolis/ Commuter Check Voucher (800) 727-9436 www.commutercheck.com/cities/minnesota.html 

St. Paul, MN 

New Jersey BusinessPass Pass (973) 491-7600 www.njtransit.com/cs_sales_buspass.shtm 

(statewide) 

New York City, TransitChek Voucher (800) 331-CHEK www.transitcenter.com 

Area 

Oakland, CA Commuter Check Voucher (800) 727-9436 www.commutercheck.com/cities/sanFrancisco.html 

Omaha, NE Bus Plus Pass (402)341-0800 www.metroareatransit.com 

Philadelphia, PA TransitChek Discount Pass (215) 592-1800 www.dvrpc.org/gettransitchek/index.htm 

Phoenix, AZ Bus Card Plus Pass (602) 495-7283 www.valleymetro.org/transit/employer.htm 

Pittsburgh, PA EZ Gold Pass (412) 442-2000 www.portauthority.org 

Portland, OR Transit Pass Programs Pass (503) 962-7670 www.trimet.org/employers/index.htm 

Rhode Island Commuter Check Voucher (800) 727-9436 www.commutercheck.com/cities/rhodeIsland.html 

Sacramento, CA TransitCheck Voucher (800) 727-9436 www.132national.com/prog_sacramento.html 

Salt Lake City, UT ECO Pass Discount Pass (801) 533-7433 www.utarideshare.com/programs/EcoPass.htm 

23

Transit and Vanpool Benefits: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

Location Program Type of Telephone Web Site 

Name Program 

San Antonio, TX Business Pass Pass (210) 362-2370 www.viainfo.net/Shared/BusPass.aspx 

Program 

San Diego, CA RideLink (619) 595-5382 www.ridelink.org/employer_services.html 

San Francisco Commuter Check Voucher (800) 727-9436 www.commutercheck.com/cities/sanFrancisco.html 

Bay Area, CA 

San Jose/ Eco Pass Discount Pass (408) 321-5527 www.vta.org/ecopass/ecopass_corp/eppricing.html 

Santa Clara, CA 

Seattle, WA Commuter Bonus Voucher (800) 727-9436 www.132national.com/prog_seattle.html 

Employer Commute (206) 263-3444 transit.metrokc.gov/prog/employer/empcommute.html 

Services 

Spokane, WA Tri-Met Program Voucher (509) 456-7277 www.spokanetransit.com/ 

Tacoma, WA Commuter Benefit (253) 589-6373 www.piercetransit.org/rideshare/employers.htm 

Program 

Trenton, NJ TransitChek Discount Pass (215) 592-1800 www.dvrpc.org/gettransitchek/index.htm 

Tulsa, OK Bonus Bucks Voucher (918) 585-1195 www.tulsatransit.org/programs/bonus.asp 

Virginia Commuter Check Voucher (800) 727-9436 www.commutercheck.com/cities/norfolk.html 

(Richmond 

and Norfolk) 

Washington, DC Metrochek/ Discount Pass/ (202) 962-1326 www.wmata.com/bus2bus/smartbenefits/pages/ 

SmartBenefits Voucher mchowitworks.html 

Wilmington, DE TransitChek Discount Pass (215) 592-1800 www.dvrpc.org/gettransitchek/index.htm 

24

Transit and Vanpool Benefits: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

Appendix B: Transit Benefits Decision Chart 

An employer wishing to institute transit or vanpool benefits must make a number of decisions about which type of program 

would best suit the employer's and employees’ needs. The chart below lists the main decisions to be made, suggests circumstances in which certain decisions would be preferable, and lists some potential consequences. 

Possible Choices Situations Favoring Decision Potential Outcomes 

Decision: Who pays? 

Criteria: Cost and tax concerns 

Employer Employer wants to give raise but 

is prohibited from doing so 

Higher costs to company but better for 

employees 

Employer wants to give benefit 

without incurring additional taxes 

Employee Employer cannot absorb 

additional costs 

Less affordable to employees; may tend to 

benefit employees who already ride transit 

or vanpool instead of encouraging new 

transit or vanpool riders 

Split Employer wants to give an equal 

benefits to each employee, but 

encourage employees to make up 

additional costs 

Different types of transit and 

vanpools have widely varying costs 

Decision: How much to pay? 

Criteria: Cost and tax concerns 

Under $105 Transit or vanpool pass is less than May not cover the full pass cost for all 

$105 per month employees 

Over $105 Employer wants to encourage transit Employer and employees will receive tax 

or vanpool user by paying full costs benefits only up to $105; after that, 

benefits are taxable 

Transit or vanpools are expensive or 

employees tend to live far away 

Decision: How to pay? 

Criteria: How many transit or vanpool agencies are in the region? 

Use transit or vanpool passes Passes can be easiest to use if there If more than one provider, may be 

is only one major provider unnecessarily complicated 

Use commercial voucher/ In vouchers are available, can More expensive; commercial voucher 

pass providers minimize employer involvement providers generally charge a fee 

25 
Transit and Vanpool Benefits: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

Possible Choices Situations favoring decision Potential Outcomes 

Decision: How to pay? 

Criteria: How many transit or vanpool agencies are in the region? 

Use commercial voucher/ May minimize administrative Requires employees to purchase 

pass providers problems if there are multiple passes themselves 

transit agencies 

May be easier with multiple worksites 

because the voucher provider may be 

able to distribute vouchers directly 

to employees’ homes 

Provide cash reimbursement According to IRS regulations, cash reimbursements can only be used if the voucher 

provider charges a fee in excess of 1% of the average cost of the vouchers 

Decision: How often to provide benefits? 

Criteria: On what basis are vouchers/passes available? How much administrative effort is involved with distribution or reimbursement? Is it a problem for cash flow if purchases are made in bulk? 

Monthly Monthly pass available More work to distribute voucher/passes 

and process reimbursements 

Quarterly Compromise between frequency 

and the need to process and pay 

lump sums 

Annually Annual transit or vanpool passes 

available 

Employees may lose pass 

Large company or multiple worksites 

where more frequent distribution of 

vouchers/passes may be cumbersome 

Minimize recurring distribution of 

passes/vouchers by reducing to once 

per year 

Appendix C: Brief

History of Transit/ 

Vanpool Benefits 

Since the 1980s, the tax status of transit/vanpool benefits has 

changed a number of times. This section briefly describes 

how their tax treatment has changed. 

1984–1992: Transit Passes are de minimus benefits; no 

tax benefits for vanpools; parking tax-free. When the federal tax code provision on transportation fringe benefits was 

established in 1984 (in the 1984 Tax Reform Act), parking 

was the only commuter benefit included as a tax-exempt 

qualified transportation fringe benefit. Transit passes could be 

offered by employers, but were considered de minimus fringe 

benefits rather than traditional fringe benefits. A de minimus 

benefit is a service or item of such small value or provided so 

infrequently as to make accounting for it impractical or 

impossible.10 As a result, transit benefits were allowed to be 

offered tax-free to employees as long as they were of small 

value. The initial de minimus value was $15 per month, 

which was later adjusted to $21 per month. If a benefit 

exceeded this value, it would be taxable in its entirety. 

Vanpool benefits did not qualify for any tax benefits (they 

were not included as either a qualified transportation fringe or 

a de minimus benefit). 

10 Examples of de minimus benefits include occasional personal use of a company copying machine, occasional parties or picnics, occasional taxi fare for employees 

working overtime, occasional tickets for entertainment, coffee and donuts, and group-term life insurance provided for a spouse or dependent of the employee with 

a face amount of $2,000 or less. 

26

Transit and Vanpool Benefits: Implementing Commuter Benefits as One of the Nation’s Best Workplaces for CommutersSM 

1992: energy policy act allows for tax-free treatment of 

transit/vanpool benefits. In 1992, Congress passed the 

Energy Policy Act of 1992 (Pub. L. No. 102-486). This Act 

expanded the term qualified transportation fringe to include 

transit passes and transportation in commuter highway vehicles (i.e., vanpools) in addition to qualified parking. As a 

result, it allowed transit passes to be provided to employees 

tax-free at a higher value than allowed as a de minimus fringe. 

It also allowed the employer, for the first time, to offer vanpool benefits tax-free. The Act imposed a tax-free limit of 

$60 per month for transit/vanpool benefits and $155 per 

month for qualified parking, and provided an inflation 

adjustment to these limits. In 1995, the tax-free limit for 

transit/vanpool benefits rose to $65 per month. To receive 

tax-free status, all benefits were required to be offered in 

addition to (and not in lieu of ) salary. 

1998: TEA-21 allows pre-tax salary deductions for transportation fringe benefits. The Transportation Equity Act of 

the 21st Century (TEA-21) of 1998 amended tax law to 

allow any qualified transportation fringe to be provided to 

employees in lieu of salary. As a result, employers can now 

allow employees to reserve some of their pre-tax income to 

pay for transit or vanpool options. The act also raised the 

tax-free limit on transit passes and commuter highway vehicle benefits from $100 per month as of 2002. (For 2005, the 

tax free limit increased to $105 per month for transit/vanpool 

benefits and $200 per month for qualified parking.) 

1999: Commuter Choice Initiative launched. Since passage 

of TEA-21, interest in transit/vanpool benefit programs has 

increased dramatically. The U.S. government, and many state 

and local governments, have implemented programs to 

encourage adoption of transit/vanpool benefits and to lead by 

example by providing transit/vanpool benefits for government 

employees. In 1999, the federal government started the 

Commuter Choice Initiative. As part of this, the Federal 

Transit Administration released the Commuter Choice 

Toolkit, and the U.S. Environmental Protection Agency, in 

collaboration with the U.S. Department of Transportation, 

initiated the Commuter Choice Leadership Program to honor 

employers providing commuting benefits to their employees. 

2000: Transit/vanpool benefit programs mandated for 

certain federal agencies. On April 21, 2000, President 

Clinton signed Executive Order 13150, Federal Workforce 

Transportation, which set an October 1, 2000 deadline for 

federal executive branch agencies to implement a transportation fringe benefit program. The EO required all federal 

agencies in the national capital (Washington, D.C.) region to 

implement a transit and vanpool pass benefit program, paid 

for with agency funds. It also required that DOT, the 

Department of Energy, and EPA implement a nationwide, 

three-year, transit pass pilot program for all of its employees, 

not just those working in the national capital region. 

(Outside the national capital region, employees are permitted 

to use pre-tax salary to pay for these benefits.) Since the passage of the federal executive order, several states, including 

Virginia and Georgia, have implemented programs to ensure 

that certain state employees receive transit/vanpool benefits. 

Some states, such as Maryland, Georgia, and Minnesota, 

have also implemented state tax credits to encourage employers to offer transit/vanpool benefits. 

2001: Final regulation: qualified transportation fringe benefits. On January 11, 2001, the IRS issued final regulations 

concerning qualified transportation fringe benefits and their 

excludability from employees’ gross income. The regulations 

provide rules to ensure that transportation benefits provided to 

employees are excludable from gross income. These regulations 

provide clarification regarding under what circumstances transportation fringes may be provided pursuant to a compensation 

reduction agreement, the ability to carry over excess amounts 

to subsequent periods, reporting requirements, and use of cash 

payments rather than transit vouchers or passes. 

2002: Best Workplaces for CommutersSM unveiled. In 

2002, EPA and the U.S. Department of Transportation 

unveiled the Best Workplaces for CommutersSM list, a list to 

honor and recognize employers that offer their employees outstanding commuting benefits. Participating companies earn the 

designation “Best Workplaces for CommutersSM”—a mark of 

excellence for environmentally and employee-friendly organizations. The program builds on the efforts of many top employers to help get employees to work safely, on time, and free of 

commute-related stress. It provides the tools, guidance, and 

promotion necessary to help U.S. employers of any size incorporate commuter benefits into their standard benefits plan, 

reap financial benefits, and gain national recognition. The list 

replaces and builds upon the work begun by the Commuter 

Choice Leadership Initiative to recognize employers who offer 

their employees outstanding commuting benefits. 

For More Information 

This guidance document and other information about the 

Best Workplaces for CommutersSM program are available at 

<www.bwc.gov> or by calling the program’s information 

request line at (888) 856-3131. 

Acknowledgements 

This document was originally prepared for EPA’s Office of 

Transportation and Air Quality under contract 68-W6-0029 

by ICF Consulting and updated by Eastern Research Group, 

Inc. under contract 2W-0693-NBLX. We would like to 

thank the various reviewers who provided comments and 

feedback on the document. 

27

EPA 420-S-01-003

Updated November 2005