402.1 Pre–Tax Transit Pass & Parking

Owned by Chad
May 20, 2021

Under current federal tax laws, this policy establishes a Pre-tax transit pass and parking plan which enables eligible employees who pay for transit passes and parking by payroll deduction to do so on a pre-tax basis. Pre-tax deductions reduce the amount of taxable income, which reduces the amount of federal and state income taxes and FICA withholding, thus increasing the employee's net take home pay. Tax savings vary, depending primarily on the cost of the transit pass and the employee's effective tax rate

POLICY PROVISIONS: Policy provisions consist of the following:

  • ELIGIBILITY: All regular employees are eligible to participate in the Plan. Temporary employees and student employees are ineligble. 
  • ENROLLMENT: Participation in the Plan is optional. Once each plan year, an employee may change his or her election for future transit pass or parking deductions. Enrollment during an open enrollment period will be made by default on a pre-tax basis unless a waiver form is signed by the employee indicating that he or she has chosen to opt-out of the Plan. If an employee chooses to opt-out, transit and parking pass deductions will be made on an after-tax basis. Employees who enroll after the open enrollment period has ended will not be eligible for the pre-tax transit or parking pass option; for these employees, transit and parking deductions will be made on an after-tax basis.
  • REPORTING TO PARTICIPANTS IN THE PLAN: For each employee who participates in the Plan, PSU will account for and report on the employee's earnings statement the current pay period amount and calendar year-to-date amounts that have been deducted on a pre-tax basis from the employee's compensation.
  • PRE-TAX BENEFIT: As a pre-tax benefit, the cost of the employee's transit pass (up to the Internal Revenue Service established limit) will be deducted from gross pay before the calculations for federal and state income taxes and FICA withholdings. Future tax treatment of this benefit is subject to on-going changes in federal and state tax governing provisions.
  • TERMINATION OF PRE-TAX PARTICIPATION: Once each Plan year, an employee may change his or her tax election for future transit and parking pass deductions. An employee may discontinue participation in the pre-tax Plan at any time by giving written notification. Participation will cease on the first pay period following receipt of the notification by the payroll office and future payroll deductions will be taken on an after-tax basis.
  • TERMINATION OF EMPLOYMENT: Participation in the Plan will end upon termination of employment. Any refunds made will be considered a taxable event to the employee since the original purchase was made on a pre-tax basis.

For more information on getting a transit or parking pass, please visit Transportation & Parking.

For more information pertaining to taxes withheld on payroll, please contact the Payroll office in Human Resources.