Philadelphia Mayor Jim Kenney signed into law an Ordinance that requires certain employers to offer a commuter transit benefit program to eligible employees. The Ordinance, entitled “Employee Commuter Transit Benefit Programs,” is effective December 31, 2022.

Employers (excluding government employers) with 50 or more “covered employees” are subject to the new Ordinance. A covered employee is anyone who has worked an average of at least 30 hours per week for the past 12 months for compensation in Philadelphia for the same employer. Accordingly, unpaid interns, volunteers, and unpaid apprentices are not covered employees.

To comply with the Ordinance, an employer must offer covered employees one of the following commuter benefit programs at benefit levels at least equal to the maximum amount that may be deducted for such programs under the applicable Internal Revenue Code section:

• An employer qualified transportation fringe benefit plan that complies with Internal Revenue Code Section 132(f) under which a covered employee may voluntarily elect pre-tax payroll deductions, as applicable, for (1) mass transit expenses, including fare instruments (e.g., passes, tokens or fare cards) and transportation in a commuter highway vehicle or (2) qualified bicycle expenses [1], including the purchase, maintenance, repair and storage expenses related to bicycle commuting
• An employer-paid benefit whereby the employer supplies a fare instrument for a covered employee’s mass transit expenses
• Any combination of the above two

Failure to comply with this Ordinance could result in fines against an employer ranging from $150 to $300 per day for each day an employer is not in compliance. Before seeking fines, however, the city is required to issue a written warning. The new law anticipates that the mayor will design an agency to issue additional guidance and handle enforcement.

Philadelphia employers should review their existing commuter benefit programs for compliance or work on developing a commuter benefit program before the December 31, 2022 deadline.

[1] The federal Tax and Jobs Act has suspended the exclusion of qualified bicycle commuting reimbursements from an employee’s income for 2018 through 2025 for federal income tax purposes. As a result, employees who receive payment for qualified bicycle commuting expenses will not be eligible for the exclusion in that timeframe. Employers should consult with their tax advisors about their ability to deduct benefit reimbursements as a business expense. For more information, also see IRS Publication 15-B (2022), Employer's Tax Guide to Fringe Benefits (Qualified Transportation Benefits).

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