Qualified transportation plan rules offer flexibility

Employers may wish to revisit their plan docs and make adjustments

This week, the IRS released an information letter (responding to an inquiry from a Member of Congress) in which the agency addresses options for minimizing benefit losses by participants who are no longer commuting, are commuting less frequently, or have changed their method of commuting due to the COVID-19 pandemic.

While the letter cautions that the regulations do not allow a refund of qualified transportation fringe benefits, it goes on to explain that:

• an employee is not precluded from rolling over unused transit benefit amounts to subsequent periods for future commuting expenses – so long as the participant has made a valid salary reduction election; and

• an employee may apply unused transit benefit amounts to another qualified transportation fringe benefit – to the extent that the other benefit is offered under the plan and the maximum monthly amount ($270 for 2020) for that benefit is not exceeded.

Note: An information letter provides general statements of well-defined law without applying them to a specific set of facts. They are furnished by the IRS in response to requests for general information by taxpayers, by Congress (on behalf of constituents), or by Congress (on their own behalf).

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