- Dual Distribution Systems
Dual distribution systems may be required for all
employers since the 1 percent safe harbor set forth in Q/A-16 is a calculation that may
fluctuate from month to month. Employers that reimburse for mass transit passes must be
prepared to switch immediately into a voucher distribution system whenever a transit
voucher vendor reduces its surcharge or variations in employee elections result in a cost
that falls below the safe harbor amount. Alternatively, an employer could (1) eliminate
the program in areas during the period in which the safe harbor is not satisfied (which
would be problematic from a human resources perspective), or (2) refuse to implement the
program altogether. We are concerned that most employers will follow the latter approach.
Moreover, the Proposed Regulation fails to provide a strong incentive for employers
with multiple locations to establish a qualified transportation fringe benefit program
providing mass transit benefits. Consider an employer with locations in both New York City
and Washington D.C. The Washington D.C. Metropolitan Area Transit Authority does not
charge a fee above the face value of the voucher; thus, the vouchers are "readily
available," and the employer is required to provide vouchers to its Washington D.C.
employees. On the other hand, because a 4 percent surcharge is imposed in New York City,
the employer’s New York City employees may have the cost of their mass transit passes
reimbursed with cash payments. Here the employer is required to maintain two entirely
different administrative and accounting systems.
Further administrative obstacles result where, for example, after the employer
implements the program and the regulation becomes final, the New York City fare media
vendor, to continue receiving some benefit from the voucher system, reduces its cost of
providing vouchers to an amount below 1 percent of the total voucher costs. Under the
Proposed Regulation as drafted, it appears that the employer, having previously
implemented a reimbursement arrangement, will be required to change its system overnight
to handle voucher purchases and distributions. In certain locations, the conversion may be
an impossibility as a result of prepurchase requirements that cannot be met in a timely
fashion. This situation is further complicated when an employer has offices in numerous
cities throughout the U.S.
Thus, each employer contemplating adopting a qualified transportation program, whether
situated in multiple locations or in a single city, will as a practical matter be required
to have a dual mechanism in place to handle both cash reimbursements and vouchers. We
believe that this presents a major disincentive for employers to provide mass transit
benefits. In our opinion, however, these issues would be adequately addressed by revising
the basis or period for testing, as we have recommended above, permitting administrative
costs to be taken into account in determining whether vouchers should be considered
readily available, as is also recommended above, and including in the final regulations an
additional safe harbor for employers with multiple locations, as discussed below.