Greener Pathways for Commuters

Providing transit benefits can be cost-effective as well as socially responsible.

By Martha Frase Sep 1, 2009

August Cover​Job candidates interviewing at Triage Consulting in San Francisco are often surprised to learn that the firm gives employees $1,000 to subsidize the lease or purchase of a hybrid automobile. This is just one way that Triage—a "green-certified" company specializing in health care—integrates environmental responsibility into aspects of its business, from waste composting to double-sided printing. As part of this commitment, HR professionals carry out policies that help employees reduce their carbon footprints in their daily commutes.

"When recruits interview here, they often ask about our corporate social responsibility," says HR Director Vanna Shir, SPHR. "We recruit people right out of college, and that is a big attraction for this group. They are looking for ‘compassionate capitalism’; they want to take pride in who they work for." And in San Francisco, being green "is almost expected."

In addition, being perceived as a socially responsible employer can boost employee morale, support recruitment and reduce turnover. "I have seen a company’s commitment to social responsibility have a real effect on how employees feel about their work," says Mark Hough, general counsel of agrochemical manufacturer Makhteshim Agan of North America Inc. in Raleigh, N.C., and a member of the Society for Human Resource Management’s (SHRM) Corporate Social Responsibility and Sustainability Special Expertise Panel.

For many employees, a greener commute produces a good feeling as well as cost savings, convenience and health benefits. Fluctuating gasoline prices, rising tolls, higher transit and parking fees, and concerns about environmental impact work against employee productivity and retention. Even more disturbing are findings from researchers at the University of California at Irvine of a correlation between experiencing traffic congestion and having health problems such as high blood pressure.

Every employer deals with the downsides of commuting, but usually without a formal strategy or a framework for responding effectively. Creating a focus on easier, greener commuting can support many human resource goals.

Being Green Gets Easier

Any benefit that reduces the number of single-driver vehicles on the roads is a greener option, and thus many companies aim to make it cost-effective for employees to use mass transit, vanpools and carpools. Government incentives help make it cost-effective for employers.

Since 1993, under Internal Revenue Service (IRS) tax code section 132(f), employers have been able to offer employees a tax-free benefit for commuting by mass transit and eligible vanpools, or to pay for commuter parking, primarily at transit or ride-sharing locations.

Under President Barack Obama’s economic stimulus plan, the amount of mass-transit commuting costs that employees can have deducted from their paychecks on a pretax basis was doubled, to $230 per month. Generally, state and local taxes do not apply. Such pretax deductions are comparable to those used to pay for medical benefits under a cafeteria plan, or retirement benefits under a 401(k) plan. Under the IRS code, however, transit benefits cannot be included in a cafeteria plan.

Moreover, employers do not have to pay federal payroll taxes on those payments. "This savings alone is usually more than enough to cover any cost of administering the program," says Larry Filler, president and chief executive officer of TransitCenter Inc., a nonprofit corporation that encourages the use of mass transit through commuter benefits and is a vendor of transit benefit cards. Its national program, TransitChek, was introduced in 1987. "When the employer saves the 7.65 percent in payroll taxes on $230 a month, that’s a savings of about $200 a year per employee," he says.

Some employers choose to subsidize workers’ commuting costs, up to $230 each month tax-free, to pay for mass transit or vanpools. The employer’s cost of providing benefits can be deducted as a business expense. But such subsidy programs are still rare. According to the SHRM 2008 Employee Benefits survey report, just 13 percent of companies subsidize transit costs.

"About one-quarter of our clients provide this benefit as a full or partial fringe benefit," Filler says. "They tend to be the really progressive employers who have environmental concerns and want to incentivize employees to use transportation alternatives." Other companies pay a portion of monthly commuting costs and let workers pay the balance with pretax dollars. The vast majority of employers providing commuting benefits offer employees a simple payroll deduction program, according to TransitCenter data.

Steering the Programs

Originally, transit benefits were administered through spending accounts into which employees put pretax dollars and employers put reimbursements. These instruments are gradually being replaced with vouchers, debit cards and transit system "smart cards." Few employers do cash reimbursements anymore, according to Filler.

Generally, an employer enrolls in a regional program such as SmartBenefits, operated by the Washington Metropolitan Area Transit Authority in the Washington, D.C., area. The program allows employers to electronically administer the transit benefit program, and employees can load their monthly benefit directly onto their SmarTrip electronic farecards. Area workers can use the transit benefit on subways, buses and commuter rail lines. Most large cities have a similar mass-transit option.

Alternatively, employers can issue employees a debit card provided by a national or regional vendor, such as TransitCenter’s TransitChek or WageWorks’ Commuter Card. The cards allow employees to purchase prepaid transit passes or load up to the $230 monthly limit onto the cards and use them like a typical debit card.

Transit benefits can also cover ferries such as those in the New York City and Seattle areas, paratransit services for people with disabilities, and commuter parking in places such as park-and-ride lots.

Transit benefits can also be applied to the costs of vanpooling. Under this arrangement, the employer leases a van from a private company and helps employees set up arrangements for ride sharing. Usually, one employee is designated as the driver and another collects money for gasoline and parking. The leasing company generally covers maintenance, repairs and insurance and provides a backup van. In many companies, employees make their own van leasing arrangements, using their pretax dollars.

Beyond Mass Transit

Because of limited mass transit in their areas, some employers in small and medium-sized cities may forgo transit benefits. This is the situation for Hough at Makhteshim Agan, which does not offer any structured transit benefit. There is no fixed-rail transit in the Research Triangle metropolitan region of Raleigh-Durham-Chapel Hill, with a population of 1.6 million. Residents without cars rely on a network of bus routes in the cities and suburbs.

"These programs work best for tier-one cities like L.A., New York, Philadelphia, Atlanta and maybe a Minneapolis or Seattle—cities that have invested in an infrastructure," says Hough. "Traffic is certainly bad here, but the options for companies like us are just to encourage carpooling or vanpooling by offering free parking."

Attorney Timothy McClain drives from Chapel Hill to Raleigh daily and has a strong opinion about the state of transportation: "I often see that the ‘solution’ to auto traffic is to make it difficult for people to use cars—primarily by limiting available parking. The difficulty I see with this is that it doesn’t really provide a complete solution, and it often creates other problems. Until regionwide mass transit is easy, ubiquitous and affordable, autos are going to remain the dominant form of transportation."

Even in such circumstances, would it be worthwhile to offer a "green commuting" benefit? "Put it in place and hope people participate and feel good about it, but there is also a cost to administer it," says Hough. "One of the tenets of corporate social responsibility is to find the sweet spot where business objectives and the public good intersect. If it’s not economically feasible to offer transit benefits, there may be other places where your company could invest in becoming more green."

The author is a writer and editor based in Martinsburg, W.Va.

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