- Delivery and Administrative Charges
In determining whether cash reimbursements
are allowed for a transit pass, under the Proposed Regulation, the employer must calculate
the average monthly administrative costs incurred by the employer for a voucher
disregarding any delivery charges up to $15. In the example in Q/A-16(c), Company C
imposes a 50-cent charge on each voucher delivered, as well as a $15 charge for delivery.
Because the cost of each voucher is $65 and the total administrative cost is 50 cents (not
including the $15 delivery charge), the administrative cost is not significant. That is,
the administrative cost in terms of a percentage of total cost equals .77 percent and does
not exceed the 1 percent threshold. Delivery charges are not taken into account since they
do not exceed the $15 threshold.
This rule may disadvantage many smaller employers. Delivery charges can range from
$8.95 in Chicago to as high as $15 for rush deliveries in Boston, San Francisco, Rhode
Island, Louisville, Denver and Norfolk. For an employer with only 1 employee participating
in the transit program who elects the maximum benefit, a $15 delivery charge causes the
total employer cost to exceed 20 percent. Nonetheless, the Proposed Regulation would still
require the employer to use the voucher system in this situation. Consequently, we
recommend that the safe harbor calculation take into account all delivery charges imposed
by the fare media provider, rather than only charges in excess of $15.
The Proposed Regulation further specifies that the administrative costs taken into
account under the "readily available’ rule include only fees charged by the
transit system or vendor of passes. We agree with other commentators that this
interpretation of the term "administrative costs" is contrary to the commonly
understood definition of the term, which would include any expenses an employer would
incur in implementing a voucher program. We believe that it is reasonable to include
within administrative costs both employers’ internal expenses and costs of any third
party administrator or record keeper. The cost of developing and maintaining a
distribution system for vouchers is particularly likely to be significant. One element
that adds to the cost is the need to protect these bearer instruments from loss,
destruction or theft. Furthermore, it would be unusual for an employer to have in place
any mechanism similar to the arrangement that would be necessary for obtaining and
distributing the vouchers. Many employers, however, have programs in effect for handling
reimbursements of health care expenses or dependent care expenses under a cafeteria plan,
and virtually all employers have established systems to reimburse employees for business
expenses, such as business-related travel and meals. Thus, the expense of establishing a
voucher program is likely to be greater because of the need to develop new systems, and
these costs should be taken into account in determining whether the administrative costs
of a voucher program are significant in applying the readily available standard under
section 132(f)(3).