Behind the pre-tax benefit decrease for transit riders

Dear Benny,
I used to be able to pay the entire amount of my SEPTA commuter pass using a pre-tax payroll deduction, but now part of the payment is coming out of my paycheck as a post-tax deduction. This is going to result in less take-home pay. Why did this happen?
--Feeling Railroaded

Dear FR,
The first thing Brian Shaw, director of Penn’s Transit Services, wants commuters to know is that the change is not a Penn policy. It’s the result of the recent expiration of the American Recovery and Reinvestment Act (ARRA).

Back in 2009, as part of the ARRA, Congress voted to increase the tax-free amount commuters were allowed to spend on public transit benefits to $230. This vote brought commuters in line with people who were already getting up to $230 in pre-tax benefits for parking, Shaw explains.

But on Jan. 1 of this year, the ARRA benefit for transit commuters expired, lowering their pre-tax benefit to $125. The pre-tax benefit for parkers, however, increased from $230 to $240.

As a result, says Shaw, Penn employees whose transit commuter costs exceed $125 a month will see the payment for their passes divided into a pre-tax and a post-tax deduction. Pre-tax is capped at $125, which includes the Penn subsidy of 5 percent. For example, those using a Zone 3 SEPTA pass ($139.50) will see a $117.25 pre-tax deduction, plus a $22.25 post-tax deduction. The new rate also applies to those who use the TransitChek program for SEPTA, DART, NJ Transit, Amtrak, and PATCO. “There are over 3,000 people at Penn who get commuter benefits,” says Shaw. “People are going to lose money.”

Shaw, who serves as president of the Association for Commuter Transportation, says supporters of the $230 pre-tax benefit sent more than 50,000 letters to Congress asking that it be saved. But it wasn’t. Shaw says efforts are being made to get Congress to reinstate the pre-tax benefit.

For more information about the transit cost issue, go to