Last month, New Jersey Governor Phil Murphy signed S.1567 into law, making the Garden State the first state to mandate a commuter benefit law, joining cities such as New York and San Francisco that have similar laws. In short, this law requires employers in the state to offer pre-tax commuter benefits to employees. While the law is currently in effect, it is not operative until the earlier of (i) 365 days following the date of enactment (March 1, 2019), or (ii) the effective date of rules and regulations that the law directs the Commission of Labor and Workforce Development to adopt.

Federal law. Before digging in further to New Jersey’s new law, let’s revisit some of the commuter benefits provisions under federal law, including a change made under the Tax Cuts and Jobs Act (passed in late 2017).

Under the Internal Revenue Code, the value of a “qualified transportation fringe” benefit provided by an employer to an employee is treated as tax-free, subject to monthly limits. A “qualified transportation fringe” is defined as:

  • transportation in a commuter highway vehicle for travel between the employee’s residence and place of employment;
  • transit passes;
  • qualified parking; and
  • qualified bicycle commuting reimbursement.

In late 2018, the IRS released new monthly contribution limits for 2019:

  • Parking – $265
  • Mass Transit – $265

Employers can still provide tax-free qualified transportation fringe benefits to employees (although qualified bicycle commuting reimbursements cannot be provided tax-free). Under the Tax Cuts and Jobs Act, an employer can no longer deduct the expenses for providing tax-free transportation fringe benefits. However, employers that treat the transportation fringe benefits as taxable W-2 wages to the employee are able to deduct the expenses of providing those benefits.

New Jersey. The state’s new commuter benefits law requires employers that employ at least 20 persons to offer a pre-tax transportation fringe benefit to all of the employer’s employees that are not subject to a collective bargaining agreement. For purposes of this law, an employee means anyone hired or employed by the employer and who reports to the employer’s work location (this follows the definition under the state’s unemployment compensation law). A pre-tax transportation fringe benefit is a benefit that allows an employee to set aside wages on a pre-tax basis, which is then only made available to the employee for the purchase of certain eligible transportation services, including transit passes and commuter highway vehicle travel.

Employers can expect the Commissioner of Labor and Workforce Development to adopt rules and regulations, in consultation with transportation management associations, transit agencies in New Jersey, and third-party transit benefit providers concerning the administration and enforcement of the law’s requirements in a manner that is “most compatible with current practices for providing pre-tax transportation fringe benefits.”

Employers that fail to comply with the law are subject to a penalty of between $100 to $250 for the first violation. Before a penalty is imposed, however, employers will have 90 days from the date of the violation to offer the pre-tax transportation fringe benefit program. If, after the 90-day cure period, the employer does not adopt a pre-tax transportation fringe benefit, it will be subject to a $250 penalty for each additional 30 day period in which an employer fails to offer the benefit.

New Jersey employers should begin thinking about the steps they will need to take to provide this benefit. Areas for consideration include the specific features of the pre-tax transportation fringe benefit program, developing a document to communicate the program to employees, and coordinating the administration of requirements in other jurisdictions, if applicable. Of course, employers will want to be on the lookout for guidance from the Commissioner of Labor and Workforce Development.

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Photo of Joseph J. Lazzarotti Joseph J. Lazzarotti

Joseph J. Lazzarotti is a Principal in the Morristown, New Jersey, office of Jackson Lewis P.C. He founded and currently leads the firm’s Privacy, e-Communication and Data Security Practice, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP) with…

Joseph J. Lazzarotti is a Principal in the Morristown, New Jersey, office of Jackson Lewis P.C. He founded and currently leads the firm’s Privacy, e-Communication and Data Security Practice, edits the firm’s Privacy Blog, and is a Certified Information Privacy Professional (CIPP) with the International Association of Privacy Professionals. Trained as an employee benefits lawyer, focused on compliance, Mr. Lazzarotti also is a member of the firm’s Employee Benefits Practice Group.

In short, his practice focuses on the matrix of laws governing the privacy, security, and management of data, as well as the impact and regulation of social media. He also counsels companies on compliance, fiduciary, taxation, and administrative matters with respect to employee benefit plans.

Privacy and cybersecurity experience – Mr. Lazzarotti counsels multinational, national and regional companies in all industries on the broad array of laws, regulations, best practices, and preventive safeguards. The following are examples of areas of focus in his practice:

  • Advising health care providers, business associates, and group health plan sponsors concerning HIPAA/HITECH compliance, including risk assessments, policies and procedures, incident response plan development, vendor assessment and management programs, and training.
  • Coached hundreds of companies through the investigation, remediation, notification, and overall response to data breaches of all kinds – PHI, PII, payment card, etc.
  • Helping organizations address questions about the application, implementation, and overall compliance with European Union’s General Data Protection Regulation (GDPR) and, in particular, its implications in the U.S., together with preparing for the California Consumer Privacy Act.
  • Working with organizations to develop and implement video, audio, and data-driven monitoring and surveillance programs. For instance, in the transportation and related industries, Joe has worked with numerous clients on fleet management programs involving the use of telematics, dash-cams, event data recorders (EDR), and related technologies. He also has advised many clients in the use of biometrics including with regard to consent, data security, and retention issues under BIPA and other laws.
  • Assisting clients with growing state data security mandates to safeguard personal information, including steering clients through detailed risk assessments and converting those assessments into practical “best practice” risk management solutions, including written information security programs (WISPs). Related work includes compliance advice concerning FTC Act, Regulation S-P, GLBA, and New York Reg. 500.
  • Advising clients about best practices for electronic communications, including in social media, as well as when communicating under a “bring your own device” (BYOD) or “company owned personally enabled device” (COPE) environment.
  • Conducting various levels of privacy and data security training for executives and employees
  • Supports organizations through mergers, acquisitions, and reorganizations with regard to the handling of employee and customer data, and the safeguarding of that data during the transaction.
  • Representing organizations in matters involving inquiries into privacy and data security compliance before federal and state agencies including the HHS Office of Civil Rights, Federal Trade Commission, and various state Attorneys General.

Benefits counseling experience – Mr. Lazzarotti’s work in the benefits counseling area covers many areas of employee benefits law. Below are some examples of that work:

  • As part of the Firm’s Health Care Reform Team, he advises employers and plan sponsors regarding the establishment, administration and operation of fully insured and self-funded health and welfare plans to comply with ERISA, IRC, ACA/PPACA, HIPAA, COBRA, ADA, GINA, and other related laws.
  • Guiding clients through the selection of plan service providers, along with negotiating service agreements with vendors to address plan compliance and operations, while leveraging data security experience to ensure plan data is safeguarded.
  • Counsels plan sponsors on day-to-day compliance and administrative issues affecting plans.
  • Assists in the design and drafting of benefit plan documents, including severance and fringe benefit plans.
  • Advises plan sponsors concerning employee benefit plan operation, administration and correcting errors in operation.

Mr. Lazzarotti speaks and writes regularly on current employee benefits and data privacy and cybersecurity topics and his work has been published in leading business and legal journals and media outlets, such as The Washington Post, Inside Counsel, Bloomberg, The National Law Journal, Financial Times, Business Insurance, HR Magazine and NPR, as well as the ABA Journal, The American Lawyer, Law360, Bender’s Labor and Employment Bulletin, the Australian Privacy Law Bulletin and the Privacy, and Data Security Law Journal.

Mr. Lazzarotti served as a judicial law clerk for the Honorable Laura Denvir Stith on the Missouri Court of Appeals.