The state of Illinois has passed a law known as the Transportation Benefits Program Act which will require some employers in the Chicago metropolitan area to offer pre-tax transportation benefits to their employees. Employers subject to the law must give employees the ability to purchase transit passes (e.g., bus passes, train passes) through pre-tax payroll deductions to get to and from work. Employees will avoid federal income taxes, state income taxes, Medicare taxes, and Social Security taxes if they purchase a transit pass with pre-tax dollars.
 

Which employers are subject to the Transportation Benefits Program Act?

Employers with 50 or more “covered employees” that are located in the following areas must provide this new benefit:

The location of the employer’s office must also be within one mile from a transit service location. The Regional Transportation Authority will make a publicly available searchable map of addresses that are located within one mile of a transit service location. 

Which employees must be offered this new benefit? 

Covered employees must be offered this new benefit. A covered employee is defined under this law as one who works an average of 35 or more hours per week. The benefit must be offered to covered employees no later than on an employee’s first full pay period after 120 days of employment. Employers may provide the benefit earlier and can optionally extend this benefit to other employees.

What is the maximum amount that can be paid for pre-tax for transit dollars?

This amount is published by the Internal Revenue Service (IRS) each year. In 2023, the maximum amount is $300 per month. This number adjust for inflation each year. The 2024 contribution limit is expected to be published in October or November of this year.

Isn’t there also a parking benefit that can be paid with pre-tax dollars?

Yes, however, the Transportation Benefits Program Act does not mandate that employers offer a pre-tax benefit for employees who incur parking expenses to get to and from work. Employers may optionally offer a pre-tax parking benefit. Employers who offer a pre-tax parking benefit may allow employees to pay for up to $300 per month (adjusted for inflation) in parking expenses with pre-tax dollars.

When does the Transportation Benefits Program Act take effect?

The law is effective on January 1, 2024