Cost Savings

The PERCENTAGES of PRE-PAYROLL TAX DEDUCTIONS for TRANSIT PASSES

ESTIMATES OF SAVINGS FOR EMPLOYERS AND EMPLOYEES

Under Section 132(f) of the IRS code, an employer can allow its employees to pay for transit or vanpooling out of their gross pay (pre-tax income). The program costs nothing for an employer to participate, but in fact, the program can save employers thousands of dollars in tax related expenses.

For transit or vanpools, employees can use up to $105 a month in pre-payroll tax deductions to pay for these commutes. That is $1,200 a year in non-taxable income. For St. Louis employees, a monthly transit pass is $50. This means that an employee in St. Louis can set aside $600 a year in pre-tax income for transit passes.

This lowers employees' taxable income, which saves them on federal income and payroll taxes. This saves the employer on payroll related taxes as well.

For example, if an employer had 100 employees who chose to take part in this program in St. Louis, that would be $60,000 a year that the employer did not pay payroll related taxes on as a company. This number becomes even larger as the number of individuals participating grows.

The Transit/Vanpool Benefit Programcan save companies time and money. Many companies want to know just how much money.

Below are several examples of actual dollar amounts calculated by Megargel & Company, an accounting firm based in St. Louis, that could be saved by implementing a Transit/Vanpool Benefit Program at a corporate worksite.

Several assumptions are made including:

Estimated Annual Salary per Employee	$30,000
Annual Salary Reduction is $50/MO for 12 months	$600
Percentage of Employee's Salary- FICA taxes	7.65%
Percentage of Employee's Salary - Plan contribution	6.00%
Percentage of Employee's Salary - St. Louis City taxes	0.50%
Wrkrs. Comp./Disab. Prems. as a % of salaries	2.00%
Employees marginal Income Tax Rate: Federal	15.00%
State	6.00%
City	1.00%

EMPLOYER #1 with 50 employees
	WITHOUT TBP	WITH TBP
# of Participating Employees	50	50
Annual Salary per Employee	$30,000	$30,000
Total Annual Salary Before TBP Annual Salary Reduction	$1,500,000	$1,500,000
TBP Annual Salary Reduction	-	(30,000)
Total Annual Salary after TBP Annual Salary Reduction	$1,500,000	$1,470,000

EMPLOYER #2 with 100 employees
	WITHOUT TBP	WITH TBP
# of Participating Employees	100	100
Annual Salary per Employee	$30,000	$30,000
Total Annual Salary Before TBP Annual Salary Reduction	$3,000,000	$3,000,000
TBP Annual Salary Reduction	-	(60,000)
Total Annual Salary after TBP Annual Salary Reduction	$3,000,000	$2,940,000

EMPLOYER #3 with 500 employees
	WITHOUT TBP	WITH TBP
# of Participating Employees	500	500
Annual Salary per Employee	$30,000	$30,000
Total Annual Salary Before TBP Annual Salary Reduction	$15,000,000	$15,000,000
TBP Annual Salary Reduction	-	(300,000)
Total Annual Salary after TBP Annual Salary Reduction	$15,000,000	$14,700,000

Estimated Annual Savings for Employer
	Employer #1	Employer #2	Employer #3
Social Security & Medicare Tax	$2295	$ 4590	$22,950
Retirement Plan Payments	1,800	3600	18,000
Insurance Premium Reductions	600	1200	6,000
City Tax Payments	150	300	1500
Employer's Annual Savings	$ 4,845	$9,690	$48,450

 

Estimated Annual Savings for Employee
Social Security & Medicare Taxes	$ 46
Income Taxes (Federal/State/City)	132
Less: Reduced Plan Payments	(36)
Employee's Annual Savings	$ 142