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Tax-Free Transportation Benefit QUESTIONS & ANSWERS
1. What is the purpose of the program? The purpose of the Program is to allow eligible employees to use funds provided by the Employer through employee salary reduction to fund Eligible Transportation Expenses pursuant to Internal Revenue Code Section 132 (f). (Eligible Transportation Expenses are defined in question #8 below.) 2. Who can participate in the program? You are eligible to participate in the Program if the Employer classifies you as a common-law employee and you are not within any one of the following categories: (a) leased employee (including, but not limited to, those individuals defined in Code 414(n)); (b) any individual classified by the Employer as a contract worker, independent contractor, temporary employee or casual employee, whether or not any such persons are on the employers W-2 payroll or are later classified as common-law employees by a government agency or pursuant to a court action or other legal proceeding (including settlement or judgement related thereto); (c) any employee covered under a collective bargaining agreement; or (d) 2% shareholder of S Corporation. 3. What tax advantages are available through the program?
Of course, your actual tax savings will vary depending on your circumstances. 4. How do I become a participant? Assuming you are eligible, you become a Participant by signing an individual salary reduction agreement, thus electing to participate in the Program. You will be provided with a salary reduction agreement when you first become eligible to participate. The salary reduction election must be made in writing prior to the period of coverage and before the receipt of plan benefits. 5. Can I change my election during a coverage period? No. Once a Salary reduction agreement is made, it cannot be changed during the period to which it relates. However, changes may be made to your election for future periods provided that the change is made before the earlier of: (a) the period to which it relates; and (b) the receipt of Eligible Transportation Expense (defined in question #8) benefits to which it relates. Such election shall be effective the first period of coverage after the Employer processes the change. 6. What is my "Transportation Expense Reimbursement Account?" If you elect benefits under the Program, your Employer will establish and maintain a Transportation Expense Reimbursement Account (Account) to keep a record of the reimbursements to which you are entitled. 7. How is my account funded? When you complete the salary reduction agreement, you specify the amount of Qualified Transportation Expense (defined in question #8) benefits for which you wish to pay with your salary reduction. Thereafter, your Account will be credited with that portion of your gross income that you have elected to forego through salary reduction. 8. What is an Eligible Transportation Expense?" Eligible Transportation Expenses include: Parking Expense, defined as expenses incurred to park your car on or near the business premises of the Employer or expenses incurred to park your car at a location from which you commute to work by (a) mass transit, (b) Commuter Highway Vehicle or (c) carpool. Transit Pass Expenses, defined as expenses incurred for a pass, token, fare card, voucher, or similar item (a Pass) for transportation (a) on mass transit facilities, whether or not publicly owned, or (b) provided by any person in the business of transporting persons for compensation or hire is such transportation is provided in a vehicle with a seating capacity of at least six adults (excluding the driver). Commuter Highway Vehicle (Vanpool) Expenses, defined as expenses incurred for transportation in a commuter highway vehicle if such transportation is in connection with travel between your residence and place of Employment. A Commuter Highway Vehicle is any highway vehicle with a seating capacity of at least six adults (not including the driver), and for which at least 80% of the mileage is for purposes of transporting employees in connection with travel between their residences and their places of employment, and on trips during which the number of employees transported for such purposes, on average, at least half of the adult seating capacity of the vehicle (not including the driver). 9. What is the Maximum Qualified Transportation Expense benefit that I may elect? The maximum amount you may continue to the Account cannot exceed the maximum amount specified in Code 132(f). For 2006, the maximum amount is: For Parking Expenses $205/month For Transit Passes and Commuter Highway Vehicle Expenses (combined total) $105/month
10. How do I receive reimbursement under the program? When you incur an expense that is eligible for payment, you must complete and submit to the administrator a Request for Reimbursement Form (which will be supplied to you) and required documentation. Request must be submitted for expenses incurred for an entire month, NO partial-month requests will be considered for payment. 11. What if I overestimate my expenses? If your reimbursement request was for less than your current account balance, the unused amounts in your account will roll over and be available for future reimbursements. You may need to adjust the election for the next coverage period in order to use up your surplus account balance. For example, if your monthly parking election (and anticipated monthly expense) is $100, but you only incur $75 worth of Eligible Parking Expenses in January, you might want to change your election for February to $75 in order to use the $25 surplus from January. Then you can increase your election back to $100 for March, prior to March 1. 12. What if I underestimate my expenses? If your reimbursement request was for an amount that was less than the monthly maximum (described above), but more than your current account balance, the excess part of the reimbursement will be carried over into the following months to be paid out as your balance becomes adequate (subject to the monthly maximum described above). Remember, though, that you cant be reimbursed for any total expenses above your available credits to your account. You may not be reimbursed for any expenses that arise before your salary reduction becomes effective. And , you cannot exceed the monthly limits shown in question 9 above. If you are provided a Transit Pass this is purchased directly by the Employer, your account will be debited directly for the cost of the Transit Pass. You will not need to submit a request for reimbursement form. If you submit a request for reimbursement that is less than $15, it will be carried forward and combined with future request until the reimbursable amount is greater than $15. If you account balance is less than $15, then the entire amount of the reimbursable requests will be paid after the close of the Program Year. In addition, you will have 30 days after the end of the Program year in which to submit a Request for Reimbursement Form for Eligible Transportation Expenses incurred prior to the termination will be forfeited. 13. What if I have an account balance and I terminate my employment? If you have any funds in your account at the time you terminate employment, any amounts not applied for Eligible Transportation Expenses incurred prior to the termination will be forfeited. 14. How long will the program remain in effect? Although the Employer expects to maintain the Program indefinitely, it has the right to modify or terminate the Program at any time. It is also possible that future changes in state or federal tax laws may require that the Program be amended accordingly. 15. What happens if a request for reimbursement is denied? If you are denied a benefit under this Program, the Employer will notify you in writing within 90 days of the date that you submitted your request. Such notification will set out the reasons your request was denied. 16. What effect will Program participation have on Social Security and other benefits? Program Participants will reduce the amount of your taxable compensation. Accordingly, there could be a decrease in your Social Security benefits or other benefits (e.g., pension, disability and life insurance) which are based on taxable compensation. For more information on the "Transportation Equity Act for the 21st Century" please visit the following link: ( TEA-21 ). If you should have any further questions regarding the terms of this program, contact EBM. |
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