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Administering Sec. 132 "Transportation Plans" with Fast-Flex Plus

Q: How does Fast-Flex Plus work with Sec. 132 "Transportation" plans?

A: Changes in the federal tax law in 1998 (Internal Revenue Code Sec. 132(f)) allow qualified transportation payroll deductions of up to a current maximum of $65 per month for qualified mass commuter transportation costs and $175 per month for qualified parking to be taken before federal income or Social Security taxes are calculated.

Under this plan, transportation costs via payroll deduction will be taken before federal withholding tax or Social Security taxes are calculated. This reduces taxable income, so you pay less tax, saving you money. Because it is a tax-exempt deduction, taxes will not be taken now or in the future. In other words, it works much like pre-tax medical and dependent care expense plans.

Transportation reimbursement plans are easy to administer with Fast-Flex Plus.
   We recommend setting up different trusts for the different parts of your transportation plan in case there are different reimbursement schedules.

For example, employer-provided parking may simply be withheld from the employee's paycheck in such a way that it appears to him just like an employee-paid insurance premium. That is, both the withholding from the paycheck and the reimbursement (payment of parking fees) occur automatically. The employee does not need to submit receipts showing that the expense was incurred. On the other hand, he may need to submit receipts for bus fares, etc.

For starters, here is a link to the actual IRS Sec. 132 tax code. (Enter "transportation" as a search word and "132" into the Section field.)

Note that it appears that Sec. 132 plans may not have many of the restrictions placed on Sec. 125 Cafeteria Plans, specifically, there do not appear to be any "Use it or lose it" rules that prevent un-spent balances from being carried year-to-year.

Also, it appears that amounts scheduled to be withheld from pay checks can be altered mid-plan year without requiring a "change in family status".
Here is a link that explains about the more lenient nature of Sec. 132 plans.

To administer Sec. 132 Plans with Fast-Flex Plus:

Step #1.
Say the company also offers its employees parking for $100 per month. Follow the instructions on page 32 of the manual to set up the parking trust. (Include "Ins." in the trust description. Example: "Parking Ins.")

Step #2.
Now, visit each participating employee record (we recommend using the "Batch Update" procedure described on page 51) and then enter each employee's ($100.00) parking fee that will be withheld from his paycheck each pay day. Note that if the employee is paid twice monthly, enter $50.00 as his scheduled parking fee. Also, enter the amount that he wants withheld to cover other qualified mass-transit expenses such as bus fares (up to $65.00).

Step #3
. On each pay day, just "Update (post) withholdings" as described on page 72. The program will automatically both withhold and "pay" the parking fees from each participating employee's parking account, keeping the employee's parking fee balance at $0.00.

Step #4
.Enter reimbursement requests for qualified mass-transit expenses as you receive them, just like you do for the employee's qualified medical and dependent care expenses. These non-parking transportation-related expenses will be included in the reimbursement check total computed by Fast-Flex Plus.