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Commuter Benefits Can Pile Up, Converting to Cash Is Difficult

Oct. 20, 2020, 9:45 AM

Employers expect fewer workers to take advantage of transportation-related benefits this open enrollment season and are focusing instead on other ways to rev up a predominantly remote workforce.

Meanwhile, some employees’ commuter benefits are piling up as they continue to work from home. Their best option is to make use of those balances once they start traveling again, benefits advisers say. The most common types of employer-provided commuter perks are hard to transfer to cash.

Employees typically pay out of pocket for services like ride sharing or gym memberships in which the employer has negotiated a discount. Those programs often require employees to pre-pay for the service, which means they may have sunk money into a benefit they’re not now using. Employers can’t unlock those funds.

Some companies also offer workers the chance to deduct allowable transportation expenses from their pay before taxes. Those funds can’t be converted to taxable cash, and employees must forfeit the money if they leave the company.

Benefits advisers expect employee optional programs like subsidized subway passes and parking spots to remain on company offerings this fall. Rather than change those benefits, companies are prioritizing other new employee needs during the global pandemic, like telehealth availability.

Opt Outs

Employees don’t need a qualifying life event, like marriage or the birth of a child, to opt in or out of commuter benefits. Still, uncertainty about how employer commuter supports work and questions about when management might call staff back to the office has likely kept some workers from changing their benefit options—resulting in swelling account balances good for future commutes but otherwise useless right now.

“People are eventually going to go back to work,” David Speier, managing director of benefits at the consulting firm Willis Towers Watson, said of the accumulated credits. He expects changes to commuter programs going forward. “More flexibility will be demanded in these products.”

If employees want refunds of those credits, they need to go to the corresponding vendors, who may or may not comply. “I can’t predict if those who offer these types of products will allow people to get their money back,” Speier said.

Five members of New York’s congressional delegation recently petitioned the IRS to relax existing rules so commuter benefit participants can use their money elsewhere.

“We urge you to consider any available options within the IRS’s regulatory authority to provide targeted relief for individuals who have accumulated unused transportation benefits due to the ongoing pandemic,” the bipartisan group wrote on Sept. 28.

For example, current rules bar refunds of commuter benefits if a participating worker’s employment with the company ends. IRS rules state that employees who have opted to have a transportation amount deducted from their paychecks before taxes can’t get a refund of the balance if the amount withheld is greater than the benefit provided. The IRS treats the fringe commuter benefit as compensation during a specific pay period, and the employee can’t have a second, taxable payout.

That may make sense under normal circumstances, but it could leave employees who lose their jobs because of the economic downturn with unspent money they can’t access. The amount could be sizable in commuter hubs like New York City.

“This is concerning for employees who may face termination due to COVID-19,” the letter said. It was signed by New York Reps. Kathleen Rice (D), Peter King (R), Lee Zeldin (R), Thomas Suozzi (D), and Gregory Meeks (D).

‘Right’ Sized Benefits

Employers can help workers figure out their benefit options as the nation adjusts to the pandemic, advisers said.

Employers should take this opportunity to make sure their benefits offerings are “right-sized” for everyone, said Karen Frost, senior vice president of health strategy at benefits provider Alight Solutions. Employers should make sure their workers re-evaluate their needs when selecting benefits, she said.

Some dependent care options might not make sense anymore, now that Covid-19 is part of the new normal. Employers can remind workers to change their commuter withholding options.

Speier said employers should be sure to adopt the flexible spending account rollover provisions the IRS authorized in May. The agency allowed health FSA holders, who are allowed to stow money tax free for child care or health purposes, to carry over up to $550 in unused funds from 2019 to cover costs incurred through Dec. 31.

Some FSAs operate on a year-end use-it-or-lose-it basis, but the pandemic has caused people to slow spend on health services like new eyeglasses, and many child-care arrangements have been severely disrupted. Plan sponsors need to amend their programs, if they haven’t already done so, to accept rollover contributions for participants to keep that money handy.

Minor Headache

Employers are focusing on more pressing employee needs than optional benefits, in part because there isn’t a reason to make major changes beyond making employees aware that they can alter their benefit profile.

The International Foundation of Employee Benefit Plans found that commuter benefits are of less concern to employers than other services like employee assistance plans. In a recent poll of 460 of its members, respondents listed their current priorities as: telemedicine (87%); employee assistance programs (78%); health care (74%); mental health (72%); flexible work (64%); wellness programs (56%); paid leave (49%); and retirement plans (48%).

An IFEBP spokeswoman lumped commuter benefits in with flexible work, roughly in the middle of the corporate to-do list.

Opt-in benefits are “not enough of a cost headache for companies to worry about changing in the short term,” Jennifer Benz, senior vice president at consulting firm Segal Benz, said.

Some companies are developing quarantine-specific benefits “to support people being at home, Benz said. “Reduced delivery fees for food delivery is one that we think is going to be very well-received. We also see a lot of child-care and child education support programs,” she said. Tech firms and financial services providers are “leading the charge on adopting these new programs.”

Companies are also offering stipends for home office improvements, giving employees the chance to splurge on everything from 4K computer monitors to comfortable desk chairs.

Misty Guinn, benefits and wellness director at software developer Benefitfocus, said she’s urging clients to redirect employer-sponsored commuter benefit contributions to remote work costs including ergonomic furniture, Wi-Fi bills, and upgrades to video chatting software for virtual meetings and presentations.

One trend Frost has spotted is concierge-style health-care services that help workers make appointments or manage prescriptions.

As for the staying power of commuter perks, Frost said in some cases they’ve served as a lifeline the past few months.

“There are people who never stopped going to work,” she said, name-checking the essential workers who’ve toiled throughout the health-care crisis.

To contact the reporter on this story: Warren Rojas in Washington at

To contact the editor responsible for this story: Fawn Johnson at

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