The subsidy incurs no payroll-related taxes. If a company offers a transit or parking benefit in lieu of compensation, they will save on federal payroll taxes, FICA, retirement, unemployment, etc., for the money that employees set aside. Employees should sign a written election to have their salaries reduced, since by law employers are required to pay employees full wages. There are no formal guidelines on employee sign-up. Under the IRS regulations governing these deductions, employees can change their pre-tax election at any time.
Employers can impose limits, however, on the frequency of such changes, if desired.
For example, some employers allow employees to sign up several times a year. Although qualified transportation fringes can be taken through a salary reduction mechanism, similar to that allowed under cafeteria plans like flexible spending accounts, the two benefit programs are different. Cafeteria plans are governed by Section 125 of the Internal Revenue Code. As long as it is made clear to employees that the Transportation Fringes are not being offered as part of a cafeteria plan, there seems to be no reason that elections under the Transportation Fringe program cannot be made at the same time and in the same manner as elections under the cafeteria plan for administrative convenience. However, there is an administrative difference.