Cash-Strapped Commuters Finding Smart Solutions in Transportation Flexible Spending Accounts

Pre-Tax Allowance Gaining in Popularity as More Employers Offer Transportation Benefits; Overall Use of Public Transit Up Nationwide

MIAMI, March 24 -- When the Miami Transit Authority hired new employees recently, they weren't drivers or dispatchers. They were penny- pinchers, in a sense, hired to help Miami commuters find innovative ways to fund their everyday commute.

"We have been [focused on] getting the business community to realize the savings they can accrue by leaving their personal vehicle at home and opting to ride public transportation," said Roosevelt Bradley, director of the Miami- Dade public transit system which moves more than 64 million passengers annually.

In the aftermath of last summer's record fuel costs, and with current prices reaching an average $2.48 a gallon, numerous entities nationwide are leaning on the tax-free advantages of Transportation Flexible Spending Accounts (FSAs) for getting public transit into commuters' embrace:

   - Many metropolitan cities including New York, San Francisco, Chicago and
     the District of Columbia (D.C.), plus the Harris County government in
     (Houston) Texas now offer incentive and education packages to commuters
     regarding Transportation FSAs.

   - Education facilities such as University of Chicago Hospitals, Drexel
     University in Philadelphia, and Georgia State University all provide
     "commuter benefits" via Transportation FSAs.

   - A Tennessee-based non-profit called 1Point Foundation has even launched
     a new website, TaxFreeTransit.org, to raise awareness about the tax
     benefits of riding mass transit. It provides commuters, transit
     authorities, and HR directors useful information on Section 132 of the
     tax code that allows for the creation of Transportation FSAs.

Transportation FSAs are gaining in popularity as more Americans are relying more heavily on public transportation since last summer. According to the American Public Transportation Association, 88% of large and small U.S. transit agencies surveyed said their ridership actually increased last November, even as gas prices declined. In some places, transit systems reported double digit increases, the survey reported.

In establishing Transportation FSAs, individual employees determine a certain amount of pre-tax salary to cover qualified costs of commuting to and from work. This means that funding for the accounts is taken out of the employee's paycheck before taxes, resulting in a lower tax base for the employee.

Mass transit commuters can contribute up to $105 per month in pre-tax dollars; people who drive themselves to work can contribute up to $205 per month in pre-tax dollars to cover qualified parking expenses. Commuters can participate in one or both of the programs.