What are Qualified Transportation Fringe Benefit Plans?
Internal Revenue Code § 132 provides guidelines that permit an employer to subsidize its employees’ transportation and parking costs. Code § 132 also allows employees to use pre-tax dollars to pay for transportation and parking expenses. The most common transportation fringe benefit plan design is the compensation reduction plan. An employer may permit employees to set up a transportation expense reimbursement plan that works much like a dependent care assistance program. A transportation expense reimbursement plan allows employees to pre-tax qualified transportation expenses that are incurred so that they may work. Code § 132 states that three qualified transportation fringe benefits may be included in a plan: vanpooling, transit passes, and parking. Commuter highway vehicle transportation (vanpooling) requires a highway vehicle with a seating capacity of six or more adults (not including the driver) where at least 80% of the mileage use for a year can be reasonably expected to be for
