Lorem ipsum dolor sit amet, consectetur adipiscing elit. Vivamus convallis sem tellus, vitae egestas felis vestibule ut.

Error message details.

Reuse Permissions

Request permission to republish or redistribute SHRM content and materials.

Rethinking Commuter Benefits for a Hybrid-Work World

Tell employees they can adjust pretax contributions to commuting accounts

A woman wearing a surgical mask on a bus.

The benefits implications of the shift to remote work last year, caused by the COVID-19 pandemic, caught even experts off guard.

David Speier, managing director of benefits accounts at consultancy Willis Towers Watson, blogged that he realized "even though I had not been in the office for several months, I was still using my pretax commuter benefit to pay for my parking space."

In a recent interview, he said he does not intend to eliminate his parking payments. "I'll go back to the office, probably on a less-frequent basis," he said. "But I'll still be a commuter, and I'll still want that preferred tax benefit. Maybe not to the same level, however, and I may want to adjust that monthly."

Speier's experience in forgetting to shut off contributions to his pretax commuter benefits was not unique, and neither is his desire for greater flexibility in how to use these benefits. Employers are re-evaluating how commuting benefits should be offered to a workforce that isn't reporting to the workplace as often as it once did.

Tax-Exempt Commuting

Section 132(f)(2) of the tax code states that the amount of transportation benefits that can be excluded from employees' gross income cannot exceed a maximum monthly dollar amount, adjusted for inflation.

The maximum monthly amount for both 2020 and 2021 is $270 for qualified parking, the same amount employers can provide on a pretax basis—or employees can contribute through pretax payroll contributions—for mass transit. While the money in a transit account will be available as long as the employee is active with the organization, accrued commuter funds cannot be refunded to the employee and are forfeited to the employer upon termination.

When employers and employees put funds into commuting or parking accounts at the start of 2020 and many employees then found themselves working from home as of March 2020, those funds became "stranded." No relief has been offered beyond an IRS clarification that money set aside for one qualifying commuter benefit (parking or mass transit) may be used for the other commuter benefit.

"There are probably hundreds of thousands of people [with commuter benefit accounts], and that translates probably to tens of millions of dollars" that was left unused in 2020, said Lisa Daglian, executive director of the New York Metropolitan Transportation Authority's Permanent Citizens Advisory Committee (PCAC).

Their plight could signal that commuting benefits are about to get a new level of scrutiny.

"As the pandemic persisted and as people stayed home, it became apparent our 'next normal' will look a lot different than any normal we have had in the past," Daglian said. "Going forward, there should be additional flexibility" so that employees with commuting benefits can cash out when they leave an employer, with withdrawn funds being taxed as income. "That way, you don't have to use it or lose it," she added.

Such a change, however, could require amending the relevant sections of the tax code.

[Related SHRM article: Commuter Benefits Are an Investment in Employees]

Highlighting Flexibility

Misty Guinn, director of customer advocacy at benefits management technology vendor Benefitfocus, said it is imperative that HR managers ensure commuting plans are as flexible as possible and remind account holders to regularly update their preferences.

"You can make changes at any time [to the amount being contributed] without a qualifying life event," Guinn said, "and it is the employer's responsibility to make sure they are continuously communicating in a timely manner with their employees [about their options]. We've learned throughout the pandemic that employees turn to their employer to help them through the uncertainty."

There are other opportunities to build greater flexibility into commuting benefits as well, such as informing employees about changes to available transit passes.

"Transit authorities understand the issues around monthly passes and have been trying to get creative," said Becky Kinder, senior director of product management at WEX Inc., benefits division. "Many are emphasizing other pass options like 10-ride or 20-ride passes with no expiration, and they are calling it the hybrid-work model. You may not be in the office five days a week anymore, but you will probably be commuting some amount."

For employer-paid transit pass subsidies, some public transit systems, including Washington, D.C.'s, allow employers to designate the treatment of unused monthly contributions as either "rollover" or "non-rollover." Rollover allows unused employer contributions to accumulate in employees' accounts, while unused non-rollover benefits are credited back to the employer at the end of the month.

Commuting's Advantages and Disadvantages

Andy Wu, assistant professor of business administration at Harvard Business School, recently co-conducted research showing the negative effects of longer commutes on employees.

"Our findings show that commuting has an especially large effect on the most productive employees," Wu said. "A company that is building a new office or moving offices needs to take a systematic look at locating their office close to where their employees are going to live."

For some employees, however, commuting can be a chance to decompress between a high-stress job and home life, "particularly if this includes a family," a reader commented on the study findings, posted online by Harvard Business School.

"Since COVID-19, many colleagues initially relished saving commuting time, believing they would have more time for themselves," the reader noted. "In reality, back-to-back video calls have just supplanted this advantage—often starting earlier in the day or extending into the evening—leading to an even more stressful existence."

Different Choices

As employers adjust their policies and benefits to meet the needs of a more distributed workforce, some are continuing to help with commuting expenses while others are deciding to redirect spending to support other benefits.

A national survey of 500 C-suite and HR executives, conducted Dec. 16, 2020, through Jan. 6, 2021, by, a caregiving benefits provider, showed that 31 percent of respondents planned to either introduce or expand commuting benefits in the near future, compared to 40 percent who planned to de-emphasize them.

Remote workers have little use for in-office perks like commuter benefits or free memberships to local attractions," Inc. reported earlier this year. "But they'll likely appreciate reimbursement for an extra computer monitor, or a Peloton membership."

Greg Goth is a freelance health and technology writer based in Oakville, Conn.

[SHRM members-only content: Commuter Transportation Benefits Plan Presentation]


​An organization run by AI is not a futuristic concept. Such technology is already a part of many workplaces and will continue to shape the labor market and HR. Here's how employers and employees can successfully manage generative AI and other AI-powered systems.