New Jersey will soon become the first state to require certain employers to offer employees tax-favored transportation benefits.

S.B. 1567, also known as An Act Concerning Pre-Tax Transportation Fringe Benefits (the “Act”), will require New Jersey employers with 20 or more employees to offer employees the opportunity to make pre-tax elections from their gross pay to cover qualifying commuter vehicle and public transit costs.

Employees will be able to use the pre-tax benefits to cover certain costs relating to “alternate means of commuting” (that is, commuting other than by means of single-occupancy vehicles), including transit passes for various forms of public transportation, car and van pools, and qualified parking at “park and ride” transit facilities. For purposes of the Act, “employee” and “employer” are defined as under the state’s unemployment compensation law, though employees covered by a collective bargaining agreement are exempted from coverage.

The Act comes in response to the federal Tax Cuts and Jobs Act of 2017, which eliminated employers’ ability to deduct the cost of providing qualified transportation benefits to employees, thus disincentivizing employers from offering such a benefit (though elections may still be excluded from employees’ wages for federal tax purposes). While New Jersey is the first state to pass legislation aimed at protecting this benefit for employees, some municipalities, including New York City, previously have enacted similar laws.

The Act will require that transit benefit elections be permitted “at the maximum benefit levels” allowable under federal law. For 2019, such maximum benefit is $265 per month, up from $260 per month in 2018.

The Act is effective immediately, though enforcement will not begin until the earlier of March 1, 2020 or the effective date of rules and regulations to be issued by the state Commission of Labor and Workforce Development. Once effective, employers who fail to comply with the requirements of the Act will be assessed a $100-$250 fine for a first-time violation, following a 90-day grace period to cure. After 90 days, covered employers will be subject to a $250 penalty for each additional 30 day period in which they fail to provide the benefit. Employers may also be responsible for costs and interest related to recovery of penalties.

Though the Act is not likely to take effect until next year, employers in New Jersey should begin reviewing their existing benefit plans to prepare for compliance with the new law.

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Photo of Allan Bloom Allan Bloom

Allan S. Bloom is a nationally recognized trial lawyer and advisor who represents management in a broad range of employment and labor law matters. As a litigator, Allan has successfully defended a number of the world’s leading companies against claims for unpaid wages…

Allan S. Bloom is a nationally recognized trial lawyer and advisor who represents management in a broad range of employment and labor law matters. As a litigator, Allan has successfully defended a number of the world’s leading companies against claims for unpaid wages, employment discrimination, breach of contract and wrongful discharge, both at the trial and appellate court levels as well as in arbitration. He has secured complete defense verdicts for clients in front of juries, as well as injunctions to protect clients’ confidential information and assets.

As the leader of Proskauer’s Wage and Hour Practice Group, Allan has been a strategic partner to a number of Fortune 500 companies to help them avoid, minimize and manage exposure to wage and hour-related risk. Allan’s views on wage and hour issues have been featured in The New York TimesReutersBloomberg and Fortune, among other leading publications. His class-action defense work for clients has saved hundreds of millions of dollars in potential damages.

Allan is regularly called on to advise boards of directors and senior leadership on highly sensitive matters such as executive transitions, internal investigations and strategic workforce planning. He also has particular expertise in the financial services industry, where he has litigated and arbitrated cases, including at FINRA and its predecessors, for more than 20 years.
A prolific author and speaker, Allan was the Editor of the New York State Bar Association’s Labor and Employment Law Journal from 2012 to 2017. He has served as an author, editor and contributor to a number of leading treatises in the field of employment law, including ADR in Employment Law (ABA/Bloomberg BNA, Senior Editor), Employment Discrimination Law (ABA/Bloomberg BNA, Final Proof Editor), Cutting Edge Advances in Resolving Workplace Disputes (Cornell University/CPR, Editor), The Employment Law Review (Law Business Research, U.S. Chapter Author), and The Complete Compliance and Ethics Manual (SCCE, Chapter Author).

Allan is a member of the NYSBA’s House of Delegates, sits on the Executive Committee of the NYSBA’s Labor and Employment Law Section, and is a Fellow of the College of Labor and Employment Lawyers. He has been recognized as a leading practitioner by Chambers since 2011.

Photo of Arielle E. Kobetz Arielle E. Kobetz

Arielle E. Kobetz is an associate in the Labor & Employment Law Department and a member of the Employment Counseling & Training Group. Her practice focuses on providing clients with strategies and counseling related to a variety of workplace-related disputes, including employee terminations…

Arielle E. Kobetz is an associate in the Labor & Employment Law Department and a member of the Employment Counseling & Training Group. Her practice focuses on providing clients with strategies and counseling related to a variety of workplace-related disputes, including employee terminations and discipline, leave and accommodation requests, and general employee relations matters. She also counsels clients on developing, implementing and enforcing personnel policies and procedures and reviewing and revising employee handbooks under federal, state and local law.

Prior to joining Proskauer, Arielle served as a law clerk at the New York City Human Resources Administration, Employment Law Unit, where she worked on a variety of employment discrimination and internal employee disciplinary issues.

Photo of Laura Fant Laura Fant

Laura Fant is a special employment law counsel in the Labor & Employment Law Department and co-administrative leader of the Counseling, Training & Pay Equity Practice Group. Her practice is dedicated to providing clients with practical solutions to common (and uncommon) employment concerns…

Laura Fant is a special employment law counsel in the Labor & Employment Law Department and co-administrative leader of the Counseling, Training & Pay Equity Practice Group. Her practice is dedicated to providing clients with practical solutions to common (and uncommon) employment concerns, with a focus on legal compliance, risk management and mitigation strategies, and workplace culture considerations.

Laura regularly counsels clients across numerous industries on a wide variety of employment matters involving recruitment and hiring, employee leave and reasonable accommodation issues, performance management, and termination of employment . She also advises on preparing, implementing and enforcing employment and separation agreements, employee handbooks and company policies, as well as provides training on topics including discrimination and harassment in the workplace. Laura is a frequent contributor to Proskauer’s Law and the Workplace blog and The Proskauer Brief podcast.