Many employers with at least fifty employees in the six-county Chicago area will have to provide their full-time employees with pre-tax public transit benefits starting January 1, 2024, under a new Illinois law.
The Transportation Benefits Program Act, enacted on July 28, 2023, makes Illinois one of a handful of U.S. jurisdictions to mandate employee transportation benefits, along with the San Francisco Bay Area, Los Angeles, Washington, D.C., Seattle, New York City, and New Jersey.
- The act applies to employers with at least fifty full-time employees working in certain geographic areas in Illinois that offer a public transit system operated by the Regional Transportation Authority.
- Beginning January 1, 2024, employers will need to provide the benefit to all full-time employees after 120 days of employment.
- The transit benefit must comply with federal rules for qualified transportation fringe benefits.
Illinois’s Transportation Benefits Program Act applies to employers that: (1) are located in one of thirty-eight specific counties and townships in Illinois, and (2) employ fifty or more full-time employees in one of the specified geographic areas at an address that is located within one mile of a fixed-route transit service run by the Regional Transportation Authority (RTA). The RTA oversees transit systems in the six-county Chicago area.
The act applies to employers in the following locations: Cook County, Warren Township in Lake County, Grant Township in Lake County, Frankfort Township in Will County, Wheatland Township in Will County, Addison Township, Bloomingdale Township, York Township, Milton Township, Winfield Township, Downers Grove Township, Lisle Township, Naperville Township, Dundee Township, Elgin Township, St. Charles Township, Geneva Township, Batavia Township, Aurora Township, Zion Township, Benton Township, Waukegan Township, Avon Township, Libertyville Township, Shields Township, Vernon Township, West Deerfield Township, Deerfield Township, McHenry Township, Nunda Township, Algonquin Township, DuPage Township, Homer Township, Lockport Township, Plainfield Township, New Lenox Township, Joliet Township, and Troy Township.
The act requires covered employers to provide a commuter benefit to all full-time employees, beginning on with the first full pay period after 120 days of employment. “Full-time” means working at least thirty-five hours per week and receiving compensation on a full-time basis. The benefit must allow employees to elect pre-tax salary reductions to be used to reimburse transit pass expenses. The act defines “transit pass” to include tokens, fare cards, and vouchers entitling a person to transportation on a public transportation system within the jurisdiction of the RTA or the Chicago Transit Authority. Employers are not required by the law to make any contributions to employees for commuter benefits, but they are allowed to do so under federal tax laws.
The transit benefit must satisfy the federal requirements and limitations for qualified transportation fringe benefits contained in Internal Revenue Code Section 132(f). This includes the monthly maximum election amount, which is subject to annual cost-of-living adjustments. The maximum amount per month in 2023 is $300. The Internal Revenue Service has not yet published the monthly maximum amount for 2024. This maximum amount applies whether transportation benefits are funded by employee salary reductions, employer contributions, or a combination of both. Federal law also allows employers to provide reimbursement benefits for vanpooling, parking, and bicycle commuting expenses, though this is not required under the Transportation Benefits Program Act.
Ogletree Deakins’ Chicago office and Employee Benefits and Executive Compensation Practice Group will continue to monitor developments and will provide updates on the Illinois and Employee Benefits and Executive Compensation blogs as additional information becomes available.