Section 132 Qualified Transportation Accounts
Governed under Section 132 of the Internal Revenue Code, QTAs help you and your employees save money by using tax-free dollars to pay for certain transportation and parking expenses. Benefit Design Specialists can assist you in the design, implementation, and management of a successful Transportation and Parking program. QTAs provide employees with a practical way to decrease their daily transportation costs. Each plan is designed to meet the client’s specific requirements and plan objectives, providing state-of-the-art employee transit and parking benefits, on a cost-effective basis.
How a QTA Works
An employee selects a contribution amount before the plan year starts, and the contribution is set aside to pay for eligible transportation expenses. Those expenses are paid for by using tax-fee dollars, which in turn lower an employee’s monthly taxable income and subsequently, the employer’s monthly payroll tax. The employee then submits substantiation of their eligible expenses to Benefit Design Specialists for reimbursement.
Tax Savings – Employers receive a social security (FICA) tax savings of 7.65% on every dollar an employee contributes to the plan. Employees have the ability to make contributions to their QTA with a Federal and FICA tax savings.
Roll-Over Options – The employer may allow 100% of funds to roll-over year after year, or they may allow a certain percentage, a set maximum amount or no funds to accumulate. The “Use-It-or-Lose- It” rule which applies to Flexible Spending Accounts (FSAs) does not apply to QTAs.
There are two primary types of QTAs, and employees may participate in one or both plans. The funds in these accounts are kept separate and cannot be rolled from one account to another. Contribution changes can be made on a monthly basis, this is much different than the FSA plans sanctioned under Section 125.
Qualified Parking – This plan allows an employee to deduct pre-tax funds for expenses for parking at or near the employer’s business premises or parking at or near a location from which an employee commutes to work by mass transit, vanpooling, carpool, etc.
Transit Passes and Vanpooling – Under this arrangement, employees can set aside pre-tax dollars to pay expenses for any pass, fare card or similar item that entitles the employee to transportation on a mass transit system to and from work or for the cost of transportation between the employee’s place of residence and place of employment in a commuter vehicle that has a seating capacity of 6 persons or more (not including the driver) where at least 80% of the mileage used for the year is for the purpose of transporting employees to their place of employment.
BDS is very well versed in working with Transportation plans. These plans tend to be popular in the metropolitan areas where mass transit and parking our daily expenses for employees. We will educate your employees on their rights and abilities under this plan arrangement so they can fully utilize their QTA. Employees can simply submit their receipts to BDS for reimbursement and we will direct deposit the reimbursement directly into their checking account.
Contact us to see if a Transportation Account would be beneficial for your employees.