Complying with New Jersey Commuter Benefits Law
With the signing of the New Jersey Transit Benefits Law on March 1, 2019, New Jersey became the first state to require employers to offer pre-tax transportation fringe benefits to employees (Transit Benefits). While some details regarding the implementation of the law remain outstanding, here are the basics.
Which employers are covered?
Every employer subject to New Jersey’s unemployment compensation law that employs at least 20 employees is required to offer Transit Benefits to all employees who are not currently covered by a collective bargaining agreement. The Law will not apply to the federal government in its capacity as an employer. At this time, there is no exception for nonprofits or state or local governmental employers, but implementing regulations may further clarify this.
Who counts as an employee?
An employee is defined as anyone hired or employed by the employer and who reports to the employer’s work location. This mirrors the definition used in unemployment compensation law.
What Transit Benefits must employers offer?
Under the Law, employers must provide pre-tax election transportation fringe benefits that provide commuter highway vehicle and transit benefits. The benefit will allow an employee to set aside a certain portion of pre-taxed wages, which would then be made available for transportation services such as transit fares and parking fees, while reducing the employee’s federal taxable income.
When does the law take effect?
The Law is effective immediately but will not be enforced until final rules and regulations are released. The earliest enforcement is anticipated to be March 1, 2020, but that is subject to change.
What is the penalty for noncompliance?
Any employer that fails to offer Transit Benefits to employees as required under the Law will be subject to a penalty of $100 to $250 for a first violation. Before a penalty is imposed, however, the employer will be given 90 days to come into compliance by offering Transit Benefits to its employees. If the employer continues to violate the Law after 90 days, each additional 30 days of noncompliance will be considered a subsequent violation, subject to a penalty of $250.
What should New Jersey employers do now?
Since the Law is not expected to take effect until March 1, 2020 (unless the Labor Commissioner adopts implementing regulations earlier), employers have time to work on implementation. However, New Jersey employers should begin preparing now, including: exploring options to establish a computer benefit plan with third-party vendors; drafting a policy; developing written communications to employees to notify them of the program and to respond to the inevitable employee questions. Of course, employers will want to be on the lookout for guidance from the Commissioner of Labor and Workforce Development. MEA will provide periodic updates.
Employers with questions about this new law should consult with experienced human resources professionals and/or labor and employment counsel. For MEA members, the Hotline and a Member Legal Services attorney are available to provide this assistance.
About the Author
Amy McAndrew is MEA’s Director of Member Legal Services and has over twenty years of experience as a labor and employment attorney.