Nearly 30 years ago, a simple yet ingenious idea took root: By allowing workers to defray public transportation costs through their employers' benefits packages, we could reduce traffic congestion and improve air quality.
In 1998, Congress amended the tax code to allow employees to take advantage of the benefit using pre-tax dollars.
In 2009, Congress raised to $230, the monthly tax-free cap commuters could spend on the transit benefit. This created parity between the transit and parking portions of the Commuter Benefit, further promoting the use of eco-friendly modes of transportation. Also, the bicycle commuter benefit reimbursement ($20/month) was added.
In 2012, however, the commuter portion cap was reduced to $125.
In 2013, as a result of strong Congressional and public support, the cap had equal standing with the parking benefit at $245.
In January 2014, the monthly transit benefit cap was cut nearly in half to $130 while the monthly parking benefit cap increased to $250. In December, the cap was retroactively increased to $250 for a limited number of commuters whose employers allowed post-tax deductions during 2014 that exceeded the $130 cap.
On January 1, 2015, the monthly transit benefit cap was cut, again, nearly in half to $130 while the monthly parking benefit cap remains at $250.
On December 18, 2015, the President signed the Consolidated Appropriations Act, 2016 which included the Protecting Americans from Tax Hikes Act of 2015 (PATH Act) making permanent parity between the transit and parking portions of the Commuter Benefit. The legislative text of the PATH Act amends section 132(f) of the tax code resulting in a new monthly transit benefit cap amount of $255 effective January 1, 2016, which includes all cost-of-living adjustments throughout the previous years. Additionally, the transit benefit was increased retroactively for 2015 to $250.
Today, commuter benefits have joined health, retirement and disability at the top of the list of voluntary benefits offered by companies. Multiple surveys show the transit benefit to be one of the most popular with employees.