A new law will take effect in Philadelphia, Pa., at the end of the year that will allow save both employers and commuters money by allowing tax-free funds to pay for certain transportation costs.
Title 9 of The Philadelphia Code will require large employers in Philadelphia to offer a mass transit program to covered employees beginning Dec. 31. Commuter benefits allow employees to save by setting aside money tax-free from their paychecks every month to spend on public transportation and carpool expenses.
Employers can offer an employee-paid, pre-tax payroll deduction or provide an employer-paid direct benefit such as a public transit key card or transportation shuttle. Commuter benefit programs can save employers up to 10 percent on FICA and payroll taxes. In Philadelphia, workers can save anywhere from $138 to $540 annually by using pre-tax dollars for transit fares depending on their fare costs and tax bracket.
The ordinance was passed by Philadelphia City Council and signed by Mayor Jim Kenney in June 2022 and applies to employers with 50 or more employees.
“I was proud to sign the Commuter Benefit Law into effect last summer. This policy will be beneficial for employers, employees and the city overall,” said Mayor Kenney. “Employees will save money by pre-taxing their transit pass, employers will save by not having to pay payroll taxes on those amounts, and the city wins by encouraging more transit ridership, which benefits us all.”
A “covered employee” is any employee who worked an average of 30 or more hours per week within Philadelphia County for the same employer within the past 12 months (Full-time telework employees and government entities are exempt). Employers are not required to provide a commuter benefit unless an employee requests one. Once requested, employers have 60 days to provide a commuter benefit.
“As inflation and the unstable economy continue to hurt everyday Philadelphians, finding financial relief for working families is more crucial than ever,” said Councilmember Helen Gym (At-Large), sponsor of the legislation. “By bringing new riders into our city’s public transit network, this program will make our streets less congested, our air cleaner and our city safer. I am proud to work with the city on novel programs like these which help employers, employees and our environment alike.”
Southeastern Pennsylvania Transportation Authority (SEPTA) offers two programs for employers:
- SEPTA Key Advantage is a transit benefit offered to all eligible employees of enrolled businesses, similar to offering a health benefit. Employees receive a deeply discounted all-access pass to ride SEPTA services like the monthly anywhere pass.
- SEPTA Key Corporate makes it possible to establish a member list and electronically load/reload SEPTA fare products each month onto multiple key cards. Employees enjoy pretax savings and have the products automatically loaded onto their cards for ease of use and savings.
“SEPTA is critical to the recovery of the city and region. We have made significant investments in safety and security, enhanced cleaning efforts, increased service levels and restructured fares to make travel more affordable and equitable,” said SEPTA General Manager and CEO Leslie S. Richards. “With the SEPTA Key Advantage and Key Commuter Programs in place, we have great options for businesses to offer transit as a benefit to their employees."
Philadelphia joins a growing list of U.S. cities that have adopted similar laws, including New York, Washington D.C., San Francisco and Oakland, Calif.
"A commuter benefit program helps employees save money on their commute via transit while saving employers money on payroll taxes. Just as important, it keeps and adds commuters to transit which reduces traffic congestion and improves air quality in our region," said Barry Seymour, Delaware Valley Regional Planning Commission executive director.
