The Affordable Transit Act (the “Act”) requires employers in New York City with 20 or more full-time employees to offer pre-tax transit benefits to employees. The Act allows employees to use up to $130 in tax free money towards their transit costs, which is the current IRS limit.  Full-time employees are defined as employees working an average of 30 hours or more per week. 

Penalties for violating the Act are $100-$250 for first time violations and $250 for repeat violations.  Employers, however, have 90 days to cure the first violation before any civil penalties will be imposed and penalties will not be imposed on any employer more than once in any 30-day period.

Employers are exempt from the Act if a collective bargaining agreement covers the relevant employees or where the employer is not required to pay federal, state and city payroll taxes.  In addition, the Department of Consumer Affairs may waive the requirements if an employer demonstrates that offering the benefit is a financial hardship.

According to the Mayor’s office, the legislation is expected to save employees over $400 a year on Metro Card expenses and employers more than $100 per year per employee in tax liability.  The Mayor’s office also predicts that the Act will extend transit benefits to more than 450,000 employees in NYC who are not currently offered them.

The Act takes effect on January 1, 2016 but in order to allow businesses adequate time to adjust to the new law, employers will not be subject to penalties prior to July 1, 2016. 

Employers who do not already offer pretax transit benefits should take the next year to ensure compliance with the new law, assess and make any necessary changes to their payroll and benefits systems, and prepare communications to employees.