Metro riders to see changes in SmarTrip accounts, possible reduction in pretax benefits

October 21, 2011

Metro riders will soon see a change in how their SmarTrip accounts store value and may face a reduction in their pretax transit benefits if Congress doesn’t take action.

Commuters now can set aside up to $230 a month in pre-tax income for use in transit, but that limit is set to fall to $125 per month at the end of the year. Parking benefits would rise from $230 a month to $240 a month.

Last year, Congress approved a last-minute fix that kept the $230-a-month transit commuter benefit in place through 2011. The transit allowance was originally increased from $120 per month as part of the federal stimulus plan.

Metro and transit advocacy groups have said the pre-tax benefits keep more riders on buses and trains and out of cars.

At the end of this year, “federal tax policy will provide more benefits for somebody who wants to drive in versus somebody who wants to take public transportation,” said Brian Tynan, director of government relations for the American Public Transportation Association.

“This is an incentive for people to take public transportation,” he said. “They’ve shown that when this benefit is available, [people] choose to take public transportation more often.”

Metro said about 256,000 area employees are registered for its SmartBenefits program. Of that, about 86,000 are in the private sector and 170,000 are federal workers.

The transit authority is “working to advocate for an extension on behalf of thousands of our customers who would be adversely impacted if the transit benefit is not extended,” said Dan Stessel, Metro’s chief spokesman.

Metro also has to make changes to comply with rules from the Internal Revenue Service that require it to separate parking and transit funds in SmartBenefits accounts.

The program requires commuters who receive both parking and transit benefits to decide how much pretax income they want to set aside monthly for each type.

“It is like having two separate buckets of value on your SmarTrip card,” Stessel said.

The IRS decided in 2006 that commuter benefit accounts should be kept separate. The rule was supposed to take effect in 2008, but the IRS granted transit agencies, which have not been able to update their systems, until Jan. 1, 2012, to comply.

Under the new system, employers or third-party providers that sometime manage the commuter benefits can decide if any unused amounts will carry over to the next month or whether riders could lose the funds.

The changes will take place over the coming months and riders will receive e-mail notifications of when their companies will do the update, Metro said.

Riders need to tap their SmarTrip cards to a fare machine, fare box, fare gate or parking garage exit for an automatic update that will reflect the separation of parking and transit funds.

Riders then do not have to load benefits at SmarTrip machines. Instead, they can tap their cards at the fare box on buses, fare gates at rail stations, or at parking lot exits and the payment will automatically be processed from the correct account.

Dana Hedgpeth is the Washington Post’s lead reporter in covering the Metro rail and bus systems in the D.C. region and the Washington Metropolitan Transit Authority (WMATA) that runs them.
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