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Posted at 3:35 PM ET, 11/29/2010

Readying for SmartBenefits change

By Robert Thomson

This question came in Monday during my online chat:

Q. I just became aware that effective January 1, 2011, the expanded transit benefit (what you can put on your Metro SmartBenefits card from pre-tax income) under the American Recovery and Reinvestment Act (ARRA) is set to return to $120 from $230 per month.

I think this means that anyone who is currently deducting more than $120 from their pre-tax income to pay for SmartTrip benefits will no longer be permitted to use more than $120 in pre-tax income to pay for their monthly Metro commutes, even though the cost of the commute for many people is well over that amount.

This means less tax savings for commuters and discourages the use of public transportation. With the Metro price hikes this year ($15 per day for many folks), and the lousy Metro performance, I question whether it's worth it to still use the Metro (financially.) Can you please advise?
-- Red Line Resentful

DG: Yes, that's a fair description of what's about to happen to commuters who take advantage of the pre-tax benefit to set aside money for transit riding. Then it gets even stickier if you factor in the long-delayed changes in how we use our SmarTrip cards in relation to the benefits.

I'm planning to write a guide to the changes for this Sunday's Commuter page in The Post's Metro section, so I'll provide just a short account here. In the comments field, please add questions about how this will affect you. Also, you can e-mail questions or comments to me at drgridlock@washpost.com.

These changes also have been the subject of two stories by Ann Scott Tyson:
Metro commuters face year-end curb in benefits

Metro commuters could lose unused transit benefits

Also, see this story by Lisa Rein:
Transit subsidy set to return to $120

$230 to $120
The expanded transit benefit, a temporary measure that was part of the federal stimulus program, is set to expire after two years on Dec. 31, unless the lame-duck session of Congress decides to extend it. Transit officials are urging Congress to do this, but it's unclear what will happen. You remember: Deficit spending is bad.

A pre-tax deduction is a form of federal subsidy. People like me, who take advantage of it, can use that money to pay for transit without it counting as part of our income tax liability. But the bigger impact will be on the many federal workers who get a direct subsidy to ride Metro. The cost of their commute could go up by as much as $1,300 a year if they are receiving the full subsidy now.

Many of them will be using this month to figure out if it will be worth commuting via Metro in 2011. This year's big fare increase went down relatively easily because so many Metro riders got the big subsidy. Cutting the subsidy by nearly half will cause many to recalculate and some will choose to take their cars. So Metro will lose money on this, too. And putting more cars on the road will affect congestion on important commuter routes.

SmartBenefits purses
The second change will sound familiar to participants in the SmartBenefits program who were paying attention late last year when it was announced: Under IRS rules, commuters will no longer be able to use their transit and parking benefits interchangeably. The IRS requires a separation of the parking and transit accounts into "purses."

Metro's announcement that it would implement this mandate caused a great deal of anxiety in late 2009, because of the announcement that any unused benefits would revert to the employer at the end of each month. It's one thing to risk losing free money. It's quite another to risk losing part of your salary, which you voluntarily placed into the pre-tax program. Metro successfully requested a one-year delay from the IRS. The year is up, but this change will be phased in.

When we reach Jan. 1, 2011, the current SmartBenefits process will continue for most people. Benefits loaded onto SmarTrip cards will remain on the cards until used.

Once your employer is migrated to the new SmartBenefits process, the employer will select how the unused monthly benefits are to be handled. They could be rolled over in the employee's transit account or unused benefits could be credited back to the employer's SmartBenefits account. You'll want to know what your employer is up to on this, and fill out any necessary paperwork.

By Robert Thomson  | November 29, 2010; 3:35 PM ET
Categories:  Metro, MetroAccess, Metrobus  | Tags:  Dr. Gridlock, smartbenefits  
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Comments

Sunday is a week too late considering that most people have through tomorrow to make any changes to their SmarTrip deductions for January.

Posted by: Razor04 | November 29, 2010 4:06 PM | Report abuse

It should be noted that this creates a huge inequity between the modes, where employers may continue to subsidize single-occupant-vehicle travel with $230 worth of tax-free parking every month.

Having the money to buy and drive a car to work every day is apparently worthy of an extra $1320 a year. Again.

Posted by: TheBoreaucrat | November 29, 2010 4:10 PM | Report abuse

Please note that the idea of returning the money to employers has nothing to do with IRS requirements. It was simply another way WMATA decided to offer their special brand of customer service.

The IRS just requires separating parking from transit.

Posted by: vtavgjoe | November 29, 2010 4:53 PM | Report abuse

If it is up to each employer whether any remaining benefits are returned to the employer or allowed to roll over to the employees transit account then I'm ok with it. Lets face it...the option to have the benefits returned to the employer is tailored for those employers that provide benefits to the employee free of charge (think government). If you're paying for out of your own pocket monthly then they should be rolled over as is currently the case.

Posted by: Razor04 | November 29, 2010 8:41 PM | Report abuse

I wish had the opportunity to complain about the reduction - my contract switched companies, and the new one does not offer Smartbenefits at all.

Posted by: BrokenClipboard | November 30, 2010 10:43 AM | Report abuse

I'm glad that I took the $240 I was paying to Metro each month (without Smartbenefits) and am using it as the entire monthly payment on my new car. Yes, I still have to pay gas, parking, insurance, etc. but my commute time has been cut in half and my stress level has dropped.

Posted by: kim6160 | November 30, 2010 1:20 PM | Report abuse

You said:

"Metro's announcement that it would implement this mandate caused a great deal of anxiety in late 2009, because of the announcement that any unused benefits would revert to the employer at the end of each month. It's one thing to risk losing free money. It's quite another to risk losing part of your salary, which you voluntarily placed into the pre-tax program. Metro successfully requested a one-year delay from the IRS. The year is up, but this change will be phased in."

How is it better that it's phased in? If you're going to loose your money, it still stinks!

Posted by: danpeake | November 30, 2010 3:11 PM | Report abuse

By phasing it in, Metro gets to pick and choose when different groups start losing money. Win-win.

Posted by: getjiggly1 | November 30, 2010 3:52 PM | Report abuse

The comments to this entry are closed.

 
 
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