by admin | Aug 21, 2025 | Blog
Qualified transportation fringe benefits are a popular way for employers to support commuting costs while offering tax advantages. But what happens to unused balances when an employee leaves the company? If you’re considering implementing a qualified transportation plan, it’s crucial to understand the IRS rules governing these benefits—especially regarding terminations.
Key IRS Rules for Transportation Plans
Two primary IRS rules shape how balances are treated upon termination:
- No-Former-Employees Rule
Qualified transportation plans cannot reimburse expenses incurred after employment ends. This means terminated employees are ineligible for post-employment transit reimbursements.
- No-Refunds Rule
Unused balances—whether from employer contributions or pre-tax salary reductions—cannot be refunded to the employee. These funds must remain within the plan.
What Can Terminated Employees Do?
Employees who leave the company can still submit reimbursement requests for qualified transportation expenses incurred during employment, as long as they do so within the plan’s run-out period—a grace period for submitting claims after coverage ends.
However, if they:
- Don’t have enough eligible expenses,
- Miss the run-out deadline, or
- Have excess contributions,
…those unused funds are forfeited.
Minimizing Forfeiture Risk Through Plan Design
Employers can reduce forfeiture risk by designing the plan thoughtfully. For example:
- Limit monthly contributions to the cost of a transit pass.
- Send regular reminders to employees about their balances and deadlines.
- Allow election changes to avoid over-contributing.
What Happens to Forfeited Funds?
Your plan document should clearly state how forfeited balances are handled. Options include:
- Retaining funds to cover plan administration costs.
- Redistributing funds to other participants (within IRS limits).
- Complying with state escheat laws, especially if the plan is “funded” (i.e., money held in separate accounts).
Qualified transportation plans offer great benefits, but they come with strict IRS rules. By understanding the limitations and designing your plan carefully, you can support your employees while minimizing forfeitures and compliance risks.
by admin | Aug 12, 2025 | Blog
A new federal law—formerly known as the “One Big Beautiful Bill”—has introduced significant changes to employee benefits. These updates impact everything from dependent care, health savings accounts to Transportation benefits. Here’s a breakdown of the most important changes employers should prepare for.
Dependent Care Benefits Expanded
- DCAP Limit Increased: Starting in 2026, the maximum tax-free amount employees can receive through a Dependent Care Assistance Program (DCAP) increases from $5,000 to $7,500 (or from $2,500 to $3,750 for married individuals filing separately).
- Employer Childcare Credit Enhanced: Employers offering childcare services will benefit from a more generous tax credit, encouraging workplace-supported childcare solutions.
Health Savings Accounts (HSAs) Strengthened
- Telehealth Coverage Made Permanent: High-deductible health plans (HDHPs) can now permanently cover telehealth services before the deductible is met, without affecting HSA eligibility.
- New HSA-Compatible Plans: Starting in 2026, bronze and catastrophic Exchange plans will qualify as HDHPs.
- Direct Primary Care Allowed: These arrangements will not disqualify HSA eligibility if they meet specific criteria. Fees for such services are now considered qualified medical expenses.
Transportation Benefits Updated
- Bicycle Commuting Reimbursements Eliminated: Starting in tax years after 2025, reimbursements for bicycle commuting expenses will no longer qualify as tax-free transportation fringe benefits. This change makes permanent the suspension that has been in place since 2018.
- Inflation Adjustments Modified: Minor updates have been made to how exclusion limits for other qualified transportation benefits—such as transit passes and parking—are adjusted for inflation.
The new federal legislation significantly enhances several core employee benefits including HSAs and DCAPs. These updates not only expand eligibility and contribution limits but also provide permanent tax advantages for both employers and employees. By aligning benefit strategies with these changes, organizations can strengthen their offerings, improve employee satisfaction, and ensure compliance with growing federal standards.
Source: Thomson Reuters
by admin | Dec 15, 2022 | Blog
A Commuter Benefits Flexible Spending Account (FSA) is an employer-sponsored account that allows participants to set aside pre-tax funds to pay for qualified mass transit and parking expenses associated with their work commute. There are two Commuter Benefit accounts: transportation and parking. Each of these accounts may receive a monthly contribution limit of $300, starting in 2023.
What to know about this account
- You must have funds in a commuter benefits account before using
- Any unused funds in a transportation and/or parking account will be lost at the end of the plan year
- Adjustments to a contribution can be made at any time; termination included
- You can manage this account online at www.NueSynergy.com or via the NueSynergy smart mobile app
Questions to consider
Why should I enroll in a Commuter Benefits account?
This account is ideal if you expect to incur commuter expenses that won’t be reimbursed by another plan. Money contributed to a Commuter Benefits account is free from federal and state taxes and remains tax-free when spent on eligible expenses.
What expenses are eligible for this account?
This all depends on which commuter account you plan on choosing. For a transportation account, expenses such as transit passes, tokens, fare cards, vouchers or items entitling you to ride a mass vehicle are eligible. For a parking account, eligible expenses consist of parking expenses incurred at/near place of work and out-of-pocket parking fees for parking meters and lots.
How do I use my Commuter Benefits FSA to pay for eligible expenses?
You can either use the NueSynergy smart debit card or pay your personal funds and submit a claim reimbursement.
by admin | Jul 28, 2022 | Blog
A Commuter Benefits FSA is a reimbursement plan governed by the IRS that grants employees to contribute a set amount of gross income to a designated account(s) before taxes. The two types of Commuter Benefit accounts are transportation and parking. Here are questions to consider regarding this plan.
What expenses are eligible for reimbursement from a Commuter Benefit FSA?
Transportation Accounts: Any out-of-pocket expenses for passes, farecards or vanpooling for transportation to and from a plan holder’s residence.
Parking accounts: Any out-of-pocket expenses for parking at or close to an employer’s business. In addition, parking expenses at or near a location from which a plan holder commutes by way of mass transit or commuter vehicle.
What is the maximum amount a participant can contribute to a Commuter Benefits FSA?
Both the Transportation and Parking accounts have a maximum monthly contribution of $280 for 2022. This amount varies every year.
