Article 3 — Does my business have to offer commuter benefits?
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Draft body
Does my business have to offer commuter benefits?
Maybe. Federal law does not require employers to offer commuter benefits, but a growing list of states, counties, and cities do. If your business has 20 or more employees and operates in one of the jurisdictions below, you are very likely required to offer a pretax commuter benefit.
The short decision tree
- New York City: Required if you have 20 or more full-time employees in NYC.
- New Jersey (statewide): Required if you have 20 or more employees in NJ.
- Washington, D.C.: Required if you have 20 or more employees in DC.
- Philadelphia: Required if you have 50 or more covered employees working 30+ hours per week in Philadelphia.
- Chicago and Cook County, Illinois: Required if you have 50 or more covered employees within one mile of fixed-route transit in the six-county RTA region (Illinois Transportation Benefits Program Act).
- Seattle: Required if you have 20 or more employees worldwide and any are working in Seattle.
- San Francisco Bay Area (nine counties): Required if you have 50 or more full-time employees in Alameda, Contra Costa, Marin, Napa, San Francisco, San Mateo, Santa Clara, southwestern Solano, or southern Sonoma.
- Berkeley, California: Required if you have 10 or more employees averaging 10+ hours per week, under the TRACC ordinance.
- Los Angeles area (SCAQMD Rule 2202): Required if you have 250 or more employees at a single worksite.
- Hawaii: State-enabling law allows counties to require commuter benefits for employers with more than 20 employees; check the specific county.
What "required" means
In most jurisdictions, you must offer employees the chance to set aside pretax dollars for transit and (sometimes) parking, up to the federal IRS limit. In 2026 that is $340 per month for transit and $340 per month for qualified parking. You do not have to subsidize the benefit. You do have to make the option available, communicate it, and keep records.
What happens if I don't comply?
Penalties vary. Examples include $100–$300 per-day fines in Philadelphia, up to $6,000 first-year penalties in D.C., and tiered fines starting at $250 in NYC. Most cities issue a warning first, then escalate.
What if I'm not required?
Most employers still benefit from offering it. The employer saves on FICA for every dollar an employee runs pretax, and employees keep more of what they make. With Alice, there is no up-front employer cost.
Confirm what applies to you
Read the deep-dive articles for Chicago / Cook County and Seattle, or the full 2026 mandates guide. If you want a human to walk you through it, email sales@thisisalice.com or call (929) 552-4625.
--- Specific benefits, election rules, and run-out periods depend on your employer's plan design. Check with your HR team or plan administrator for details.
Alice does not provide tax, legal, or financial advice. Consult your own tax preparer, lawyer, or financial advisor for guidance specific to your situation.
Figures shown are for the 2026 plan year and are set by the IRS. Limits are indexed annually; we update this article each November when the IRS issues the following year's Revenue Procedure.