Businesses that want to attract top talent have long used employee benefits packages to entice workers. Traditional benefits, like paid time off, health insurance, and the 401(k), remain the cornerstone of compensation packages. Increasingly, though, employers also offer other benefits – such as QTA benefits.
What are Qualified Transportation Accounts (QTAs)?
Qualified transportation accounts (QTAs) are an employer-sponsored benefit plan that allows employees to use pre-tax dollars to pay for eligible transportation expenses. Eligible expenses for the pre-tax transportation benefits include a transit and a parking component.
Transit costs can include most expenses employees incur when not taking their personal vehicle to and from work. Public and mass transit, including subway, bus, rail, and ferry, are covered whether riding with individual tickets or a monthly pass. Carpooling is eligible if the vehicle seats at least six adults plus a driver (i.e., vanpooling). UberPool and Lyft Shared are also eligible.
Qualifying parking spaces include most parking near work or a public transit location. These could be meters (with a receipt), an open lot, a parking garage, or another location.
Transportation costs for driving a personal vehicle aren’t eligible. Employees who drive to work can use the parking expense component but not transportation for gas, maintenance, or tolls.
The maximum allowed amount is based on a monthly, rather than annual, amount. For 2024, the IRS allows employees to use up to $315 monthly for each transportation and parking ($630 per month total).
Benefits of Offering QTAs to Employees
Qualified transportation accounts are helpful to employees at all pay levels, making them something most employers should consider.
Tax Advantages of QTAs
Low-wage employees appreciate a tax break on such a direct and immediate cost. Some individuals may not have the financial means to wait until their retirement age to receive the benefits of a 401(k) plan. Still, they can take advantage of an immediate monthly expense. Sometimes, this is one of the few benefits employers can afford to give low-wage employees.
Transportation Expense Management
Additionally, many high-income employees work in locations where parking is expensive, rush hour can be severe, and public transit isn’t cheap. If you have employees working at a downtown location in any city, and particularly if they’re in a major city, this is something that your employees would undoubtedly want and use.
Enhanced Employee Satisfaction
For employers, offering a QTA benefit is an easy way to attract new employees, increase retention, and generally make employees a little happier. It can be especially effective for locations where transportation costs are high and rush hour is long.
How to Implement QTAs in Your Compensation Package
As with other employee benefits, employers usually don’t administer qualified transportation accounts themselves. Instead, they outsource to a QTA provider.
At Progressive Benefits Solutions, we specialize in QTAs. Our team can discuss this specific benefit in detail, and we can provide QTA benefits administration alongside other employee benefits administration for a comprehensive, efficient solution.
Once you’ve chosen a third-party benefits administrator to work with, you’ll then set up the processes necessary for employees to use their QTA benefits. Our team can walk you through the initial setup and ensure employees can easily use their benefits.
After setup, the final step is to educate employees on the benefits and how to take advantage of their QTA.
Best Practices for Maximizing the Effectiveness of QTAs
The success of a qualified transportation account program depends on effective communication. Various methods can be used to maximize QTA benefits for employees.
Many employees might not know how a QTA can help them manage transportation expenses. It is important to inform employees about the benefits and explain how those benefits can help them. Human resources representatives should be familiar with eligible expenses and how much can be used monthly. HR should also calculate the rough tax savings at different salary levels and provide examples of how much employees might save on taxes.
Employees should be continuously encouraged to take advantage of the QTA benefit. HR representatives and managers should urge employees to enroll and participate. Once a few use the benefit, they’ll often organically encourage others. HR and managers may only need to inform new employees and periodically remind current employees of the benefits.
Monitor and Evaluate the Impact
Of course, employers should monitor the ongoing use of any benefit they offer. Following usage and gathering employee feedback will help employers improve satisfaction and tailor a QTA benefit program for their employees.
Set Up QTA Benefits for Your Employees
A qualified transportation account is a valuable benefit that most employers can offer to their employees. Unlike other benefits that may not be useful for everyone, this account can be utilized by almost every employee.
If a QTA benefit is something that your employees would appreciate (and it likely is), contact us at Progressive Benefits Solutions. You can learn more about QTAs and how we help them or get in touch to speak directly with one of our team members.