San Francisco Requires Employer-Sponsored Commuter Benefits

San Francisco’s Mayor Newsom has signed into law legislation requiring employers to provide commuter benefits for employees effective December 22, 2008. The Ordinance, created to lower greenhouse gas emissions by reducing congestion, states employers in the City and County of San Francisco must provide one of the following benefits to employees:

• Employer may set up a Section 132(f) plan to allow employees to pay for mass transit expenses pretax,
• Employer may pay an employee’s mass transit expenses,
• Employer may create van pools for workers,

Section 132(f) benefits asist both employees and employers. When a benefit provides pre tax deductions, the employer is not required to pay Social Security or other taxes on the amount deducted. Also, funds in a Section 132 may only be withdrawn once deposited into the employee’s account, so there is no risk to the employer.

Section 132(f) does not fall under the ERISA umbrella, which reduces the disclosure and reporting requirements. Employers are not required to provide Summary Plan Descriptions, 5500 filings or COBRA rights. However, since Section 132(f) does not constitute an ERISA plan, an employer may not refuse to follow the Ordinance due to ERISA preemption

An employer is defined as an organization with 20 or more employees. When determining an employer’s employee count, all employees: full time, part time and temporary are included, regardless of the actual location where they work. An employer needs to offer one of the above benefits to all employees working an average of 10 or more hours per week. As the effective date of the Ordinance approaches, more detailed information regarding the legislation and potential reporting requirements are expected.

Violations of this new ordinance will range in fines between $100 and $500.