San Francisco employers are likely to face new legislation requiring them to provide employees with the opportunity to use pretax earnings to pay for passes on public transportation.
The commuter benefits legislation is expected to be approved by the city’s Board of Supervisors this month. It is the latest in a string of mandates enacted in the past two years that include mandatory paid sick leave, an increase in the minimum wage and, this year, a requirement for employers to provide health insurance for employees or pay into a city health care fund.
“The perception of a mandate has not been helpful for us,” says Rob Black, vice president for public policy at the San Francisco Chamber of Commerce. “On the whole, we think it’s good for businesses to offer these programs, which have tax benefits to employers and employees, but because it’s a mandate it’s harder for us to get businesses to participate.”
The legislation was introduced by Supervisor Ross Mir¬karimi. If approved, it is likely that Mayor Gavin Newsom, whose Department of the Environment supports the legislation, will sign it into law.
“It’s a way to help increase public transit in San Francisco,” says Jeremy Pollock, a legislative aid for Mirkarimi. “It’s a benefit for employees that shouldn’t cost employers anything.”
The cost of administering the plan is offset because of the tax savings employers reap. By purchasing transportation passes with pretax dollars, an employee’s taxable earnings decrease, which reduces payroll taxes owed by employers.
A similar measure in New York City failed to pass in 2003.
With high gas prices and mounting environmental concerns, cities can be expected to step up their pressure on employers to help reduce congestion and pollution, says Dan Corbett, vice president for transportation development for WageWorks, a San Mateo, California, company that offers pretax benefits programs for employers.
“More places are looking at employer requirements to reduce congestion, traffic and pollution,” Corbett says.
While the city’s legislation may benefit employers, a principle may also be at stake, says Jamie Allen, a partner in the San Francisco law office of Jackson Lewis.
“The concern with this type of legislation is, here is another example of the city and county of San Francisco … not being particularly cognizant of businesses’ need to be operating their business as they see fit,” he says.
The economic and environmental value of the commuter benefits program may be undercut by the requirement behind it, Black says.
Black believes education would go a long way toward promoting public transportation. Employers would be more likely to offer the program voluntarily if they understood its tax advantages, he says.
Employers may comply with the proposed mandate, but the backlash may lead them to do nothing to make sure their employees take advantage of it. The Chamber of Commerce has asked the city to provide a one-year window between enacting the law and its enforcement to give the organization more time to educate employers. But Black says he expects a time frame closer to three to six months.
“The idea is, let’s get employers to actually buy into marketing it to employees,” he says. “Just because they offer it doesn’t mean anyone knows about it or they take you up on it.”
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