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Commuter benefits are a type of pre-tax benefit account where you can set aside pre-tax dollars to pay for qualified commuting expenses.
To offer commuter benefits with Gusto, your company must first offer health insurance with Gusto. If you already offer commuter benefits and manage them through a third party, admins can set up payroll deductions.
Choose a dropdown below to learn the basics about how commuter benefits work. If your commuter benefits are managed by Gusto, head to the Benefits section of your Gusto account to learn about your plan's details.
Who's eligible
At a minimum, all full-time employees are eligible to enroll.
Commuter eligibility is separate from medical eligibility. Your company may also choose to offer commuter benefits to:
If you’d like to change your company’s commuter eligibility restrictions, contact us for assistance.
Whos's ineligible
Per the IRS, some people are not eligible to participate in commuter benefits:
| Qualified transit expenses | Qualified parking expenses | Unqualified expenses |
|---|---|---|
| Train | Parking lots | Tolls |
| Subway | Parking meters | Gas |
| Bus | Parking garages | Car maintenance |
| Ferry | Parking space provided by your employer | Parking that isn't part of your commute (ex: parking for lunch or at a third-party location, even if it's for work) |
| Vanpool | Bike expenses | |
| Parking at a secondary work location |
Some public transit stations may sell miscellaneous items like newspapers, coffee, parking passes, etc. These expenses are unqualified expenses. If your card is declined, you can submit a claim to get reimbursed for qualified expenses only.
Parking funds can only be used for parking expenses, and transit funds can only be used for transit expenses. Funds cannot be transferred between accounts. Once funds have been deposited into an account, they cannot be removed for anything other than qualified expenses. If the benefit is canceled or you leave your company, check out the "Use your commuter benefits" section below to learn about your deadline to submit claims.
Pre-tax contribution and spend limits
The IRS sets a monthly contribution and spend limit for commuter benefits. You can only contribute and spend up to the limit each month.
Any unused funds roll over to the next month. There's no limit to how much can accumulate, but you can only spend up to the IRS limit each month and you cannot move funds between parking and transit accounts. Once funds have been deposited into an account, they cannot be removed for anything other than qualified expenses. You can change your contribution each month, so if you have extra funds to spend, you can decrease your contribution limit.
Company contributions
Employers can but are not required to contribute to employee commuter accounts.
If your employer offers a contribution, while enrolling, you must elect at least that amount to receive the contribution. Ex: Say your employer offers up to $100 total, which you can apply to parking and/or transit. To take advantage of the full employer contribution, you must elect at least $100 total between parking and/or transit. You could elect $100 to parking and $0 to transit, or $50 to parking and $50 to transit, etc. If you only elect $50 for parking and $0 for transit, you're leaving $50 in employer contributions on the table. If you elect $100 toward parking and $50 toward transit, you'd be deducted $50/month.
View year-to-date contributions
If you want to know how much you've contributed to your commuter benefits, check your paystub or the Benefits section of your Gusto account.
Change contributions
You can change your commuter benefit elections at any time once your benefit is active.
Changes must be submitted 2 days before the last day of a month in order to take effect on the first day of the following month. Example: If you want changes to take effect May 1st, submit your change in Gusto by April 28th.
Fund availability
Your full election amount is available for you to use on the first of each month. You can only spend up to the IRS limit each month.
Payroll deductions
Employee contributions are deducted pre-tax from payroll.
Deductions for any given month are evenly distributed across each payroll with a check date in that month. Ex: If you contribute $200 a month and your company's check dates are on the 15th and the 30th of each month, you'll be deducted $100 on each check date.
Exception: If payroll is processed in the month before the check date, any scheduled catch-up deductions will be taken, but regular deductions will not be taken. Regular deductions will be evenly distributed across the remaining check dates for that month.
Company bank account debits
Some cities have laws around commuter benefits that companies may have to follow based on where their business is located. It’s also best to check local and state laws to make sure you're complying with any requirements.
If you operate in any of these cities, your employees do not have to take advantage of the benefit, but you are required to offer it.
Here are some of the cities with known commuter benefit laws:
| City | Requirements apply to companies with... |
|---|---|
| Berkeley, CA | 10+ full-time employees |
| New York City | 20+ full-time employees |
| Richmond, CA | 10+ employees who work an average of at least 10 hours per week |
| San Francisco, CA | 20+ employees |
| Seattle, WA | 20+ employees |
| Washington, DC | 20+ employees |
This is not an exhaustive list. It’s also best to check local and state laws to make sure you're complying with any requirements.
When an employee sets aside pre-tax money for commuter benefits, their gross taxable income is lowered. Since employers are taxed for FICA on the amount an employee earns, employer taxes are also reduced.
Here's everything you need to know about setting up commuter benefits for your company.
Here is the pricing for your company to offer commuter benefits:
To offer commuter benefits with Gusto, you must have health insurance with Gusto or use our broker integration.
If you already offer commuter benefits and manage them externally, you can transfer them to Gusto or set up payroll deductions.
Set up commuter benefits in Gusto
You can start offering commuter benefits to your team anytime throughout the year by following the steps below. The benefits will begin two calendar months later, on the first of the month (ex: if you finalize the benefit in Gusto on any day in January, the plan will start on March 1st).
Once you’ve finished adding the commuter benefits, we'll email you with the effective date and we'll notify your eligible employees to enroll.
Unlike most other benefits, your team can enroll, cancel, or change their commuter benefit elections anytime throughout the year.
If your company currently offers commuter benefits, follow the steps below to transfer them to Gusto.
Once you finish adding info about your company's commuter benefits, we'll reach out with next steps to transfer them to Gusto.
Who's eligible
At a minimum, all full-time employees are eligible to enroll.
Commuter eligibility is separate from medical eligibility. Your company may also choose to offer commuter benefits to:
If you’d like to change your company’s commuter eligibility restrictions, contact us for assistance.
Who's ineligible
Per the IRS, some people are not eligible to participate in commuter benefits:
When you can enroll
Eligible employees can enroll in commuter benefits or change their contributions anytime throughout the year.
Your benefits start date depends on when you enroll:
Enroll in commuter benefits
Follow these steps to enroll in commuter benefits from your Gusto account.
Your Gusto Benefits Card will be sent to your mailing address in a plain white envelope before the benefits start date. Use the Benefits Card Hub to manage your cards, submit expenses for reimbursement, and more.
If you need to change your election, you can do so anytime throughout the year by following the steps in the "Manage your commuter benefits" section below.
Commuter benefit funds can be used on either transit or parking expenses, by swiping your card or entering your card number for an online purchase. If purchasing online, the billing address is your home address.
Remember: The IRS monthly maximum ($325/month for transit and $325/month for parking) is both a contribution and usage limit. This means you can only contribute up to the limit each month, and you can only spend up to the limit each month. The monthly usage limit is determined by a service's purchase date, not the date you submit the claim.
Once funds are contributed to a particular commuting account (transit or parking), those funds must be used for eligible expenses within that account. This means:
There are three ways you can use your funds on eligible expenses:
You can review and manage your expenses in the Benefits Card Hub: Under "My Accounts," click Commuter. See the steps above on how to register or sign in to the Benefits Card Hub.
Add or edit a reimbursement method
You can choose to be reimbursed by check, direct deposit, Venmo, or PayPal. Follow these steps to set up or change your reimbursement method:
Note: Adding a bank account can take 2–3 business days to verify.
Receipt requirements
Make sure your receipt includes:
Submit an expense for reimbursement
If you paid out of pocket for an eligible expense, you may submit it for reimbursement as long as the service was rendered during your coverage period, and the final date to submit claims has not passed.
To submit an expense for reimbursement:
If the information can be validated immediately, your claim will be approved on the spot. If additional review is required you will receive an email when the claim has been processed. This is typically 3-5 business days
When you'll be reimbursed
If your claim is approved, you’ll be reimbursed using the reimbursement method you selected above.
Here's how the reimbursement is sent, based on the reimbursement method you've chosen:
Submit an expense for reimbursement after leaving your company
If your benefit has a runout period, you may have extra time to submit claims for qualifying expenses incurred during your employment. You can confirm your last day to submit an expense in the Benefits Card Hub.
If you did not register for your Benefits Card Hub during your employment, contact Gusto for help.
Pay a bill directly
If you receive a bill for an eligible expense, you can pay it via check directly from your associated pre-tax benefit account.
If you've already paid the bill and want to be reimbursed, go to the header above titled "Submit an expense for reimbursement."
Here's how to pay a bill:
If all the required information can be identified in the receipt, your claim will be automatically approved and the payment will be made to the provider by check. If not, the claim will be manually reviewed within 3-5 business days. You will receive an email once the claim has been reviewed and processed.
Note: Checks expire after 180 days. You will receive an email if a check is about to expire. If the check was sent to your provider please connect with them first about the payment.
The IRS requires that you purchase transit passes with your pre-tax commuter card only at authorized transit vendors, which are vendors, kiosks, or machines that sell transit passes only. If you try to purchase your transit pass at Walgreens, Whole Foods, or any merchant that sells anything other than transit passes, it will be denied. For more on the IRS regulation, check out these resources: IRS Publication 15-B and Section 132(f) of Internal Revenue Code.
San Francisco Bay Area
CalTrain and BART station machines are unauthorized vendors because you can also buy parking passes at these kiosks.
For BART, CalTrain, Muni and many other transportation resources in the Bay Area, we recommend that you autoload a Clipper Card online.
Washington D.C. and Maryland Area
Washington D.C.‘s WMATA SmarTrip and Baltimore’s Charm Card are unauthorized vendors because the funds loaded into those accounts can be used to pay for ineligible expenses, such as parking. If you need to use your commuter card in the D.C. or Maryland areas, follow the usual steps to submit a claim.
Choose a section below for more ways to manage your commuter benefits.
You can change your commuter benefit elections at any time once your benefit is active. If this is your first enrollment and you've already submitted the amount, reach out to our team at benefits@gusto.com to make the change.
Changes must be submitted 2 days before the last of day the month in order to take effect on the first day of the following month. For example, if you want changes to take effect May 1st, submit your change in Gusto by April 28th.
Change your contribution
Follow these steps to change your commuter benefits contribution:
Cancel your commuter benefits
You can cancel your commuter enrollment at any time. If you have a current balance, you will have 90 days after you end the policy to submit claims for services incurred while the policy was active. After the 90 days, any remaining funds will be forfeited to the company and are not reimbursed—even if they were employee-funded.
To avoid forfeiting the funds, reduce the contribution amount instead of canceling the enrollment. This buys you time to use the balance in the account before terminating the policy, without having to put much more money in it.
If you no longer want to offer commuter benefits to your team, you can submit a cancellation request from your admin account.
There are no tax forms required for commuter benefits.
After your plan year ends or if you leave your company, you may have extra time to submit expenses for reimbursements. To confirm your deadline to submit an expense for reimbursement: Sign in to your Gusto employee account and go to the Benefits section. Click the Commuter tile, then access your Gusto Benefits Card Hub.
Runout period
If your company stops offering commuter benefits through Gusto or you cancel your own plan, you have until 90 days after the last day of the plan to submit claims for expenses incurred during the plan period. This is called the runout period.
If your company is moving off of Gusto or has found a new broker, connect with your employer on whether your commuter benefits will be moving as well. In either of these situations, you will not be able to submit expenses for reimbursement after the plan has ended.
Leftover funds
After the 90-day runout period, any unused funds will be forfeited back to the company (as set by Section 1.132-9(b) Q&A 14(d) of this IRS document).
Runout period
If you leave your company and you were enrolled in commuter benefits, the plan will end on your last day of employment. Afterwards, there is a runout period where you have 90 days after the last day of employment to submit an expense for reimbursement for services incurred while the policy was active.
Leftover funds
After the runout period is over, any unused funds will be forfeited back to the company (as set by Section 1.132-9(b) Q&A 14(d) of this IRS document).