Congress extends transit benefit for a year

By Ann Scott Tyson
Washington Post Staff Writer
Friday, December 17, 2010; 9:37 PM

Metro riders were granted a last-minute reprieve from two long-looming changes as a bill signed Friday temporarily extended the $230 transit benefit and the Internal Revenue Service gave Metro another year to implement a separation of parking and transit benefits in SmartBenefit accounts.

Congress acted to continue the $230-a-month transit commuter benefit through 2011 - rather than allow it to revert to $120 - as part of legislation continuing the Bush-era tax cuts.

The legislation, signed into law by President Obama, will maintain a transit benefit that Metro says is keeping more people on trains and buses and out of cars. Metro estimated that if the benefit expired Dec. 31, the transit agency would have lost 1.3 million to 3.8 million trips yearly, with revenue dropping $5 million to $10 million as a result.

"This move benefits transit riders directly and ultimately reduces traffic congestion, as people are incentivized to use public transportation," Metro Interim General Manager Richard Sarles said in a statement.

The benefit reduction would have negatively impacted public transit users nationwide, said William Millar, president of the American Public Transportation Association, which lobbied Congress to retain it. Americans take about 35 million trips on public transit each day, he said.

"There would have been many thousands of commuters across the country who would have suffered had this not passed," Millar said. "We are very happy with the one-year extension." He added that the parking benefit is permanently set at $230 and that he thinks the transit extension should be, too.

The association said that the increased tax liability for each commuter who receives the $230 benefit would have been about $500 a year and that employers with 100 employees using the benefit would have seen their tax liability grow by $10,000 annually.

About 285,000 area workers have received transit benefits of up to $230 a month since March 2009, when they were increased from $120 a month as part of the Obama administration's economic stimulus legislation, which expires Dec. 31.

Of those, about 170,000 federal employees and 115,000 private employees are registered for the SmartBenefits program, Metro data show.

SmartBenefits allows employers to provide workers with a tax-free or pretax benefit, currently set at up to $230 a month for transit and $230 a month for parking. Federal employees receive subsidies of the same amount. At least 90,000 Metro riders receive more than $120 per month in transit benefits.

In another decision impacting commuter benefits, the IRS extended from Jan. 1, 2011, to Jan. 1, 2012, a requirement that Metro implement a division of parking and transit funds in SmartBenefits accounts.

The new program will require the estimated 220,000 commuters who receive both transit and parking benefits to decide how much pretax income they want to set aside monthly for each type.

Employers will then decide whether any unused benefits will carry into the next month, meaning that Metro customers using SmartBenefits could potentially face the loss of unused funds on their cards at the end of each month.

In 2006, the IRS ruled that the accounts must be kept separate beginning in 2008 then granted a two-year delay to give time for transit systems nationwide to comply. Last year, Metro requested and was granted a further extension until Jan. 1, 2011, to implement technology and work with employers, whose workers were irate at the possibility of forfeiting money from their paychecks.

Metro said this year that it would roll out the changes in early 2011, despite a Jan. 1 deadline. Announcing the postponement Friday, it said it will get an earlier start this time, gradually transitioning employers to the program over several months.

Commuters will then no longer download benefits monthly at Farecard machines. Instead, when they tap their cards at the rail gate, bus farebox or parking lot, payment will be automatically processed from the appropriate account.

© 2010 The Washington Post Company