Philadelphia (PA) benefits mandate and tax program
Employee Commuter Transit Benefit Programs Ordinance
The Philadelphia Employee Commuter Transit Benefit Programs, launched in 2022, requires employers with 50 or more employees to offer commuter or transit benefits to their workforce. The program is designed to reduce traffic congestion, lower air pollution, and encourage the use of sustainable transportation options such as public transit and vanpools. Additionally, it provides tax savings for both employees and employers by allowing pre-tax payroll deductions for commuting expenses, making alternative transportation more accessible and affordable.
Covered employee:
Anyone who has worked an average of 30 hours per week for the same employer within the city limits of Philadelphia (see below) over the past 12 months.
Covered employee:
Any business or entity with 50 or more covered employees, excluding government employers.
Every covered employer must provide all covered employees with access to at least one of the following commuter transit benefit options:
- Pre-tax payroll deduction: Employees must be given the option to elect a pre-tax payroll deduction for Mass Transit or Qualified Bicycle Expenses. This benefit must comply with the Internal Revenue Code and be offered at the maximum level allowed under federal law, as amended.
- Employer-paid transit benefits: Employers may instead provide a Fare Instrument (e.g., transit pass) covering an employee’s Mass Transit Expenses. The value must meet or exceed the federal maximum exclusion under §132(f)(2) of the Internal Revenue Code.
- Any combination of the above.
These benefits support affordable, sustainable commuting and align with federal tax incentives.
Want to know more about compliance requirements in Philadelphia, or want to start offering commuter benefits to your employees?
Financial penalties in Philadelphia are determined on a case-by-case basis and can reach up to $100,000 in the first year. Repeat offenses lead to even higher fines, ranging from $150 to $300 per day of noncompliance. For larger companies, these ongoing violations can rapidly accumulate, making non-compliance a significant and costly liability.
For Philadelphia, the nationwide IRS tax-free limits for commuter benefits apply. For 2025, employees can allocate up to $325 per month for transit and $325 per month for parking, reducing taxable income.
- Pre-tax savings: Employees can lower their taxable income by setting aside funds for transit and vanpool expenses.
- Employer tax benefits: Businesses save an average of 7.65% per employee on payroll taxes.
- Direct transit subsidies: Employers can provide up to $325 per month per employee in tax-deductible transit benefits.
- Additional incentives: Some cities and states offer grants, tax credits, or subsidies for implementing commuter benefit programs.
