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Learn how transit agencies can team up with employers to boost ridership and keep transit affordable.
Transit is a key part of what makes our cities the dynamic, accessible, and vibrant places we love to call home. Unfortunately, as transit is still recovering from pandemic ridership changes, core funding is becoming increasingly uncertain. Many transit agencies are being forced to raise fares. If fare increases are inevitable, what can transit agencies do to help shelter riders from increased costs?
Imagine if your agency could wave a magic wand and riders would start paying 30% less for transit every day? What would that do for ridership, congestion, and system efficiency?
It’s not magic, it’s pre-tax commuter benefits.
Read on to learn how transit agencies can make the most of existing pre-tax commuter benefit rules to offset the ridership impacts of fare hikes.
The federal tax code defines what is and isn’t taxable income, and it defines several kinds of expenses that employees can take out of their taxable income, thus reducing the amount of taxes they have to pay. Some retirement and healthcare contributions are eligible to be made pre-tax. You might also have noticed an option to report moving expenses in your taxes, which can also be eligible for pre-tax.
Commuter benefits have been eligible for pre-tax contributions for decades, and each year the federal government increases the amount that can be set aside for transit. In 2025, eligible employees can set up to $325 a month aside to spend on transit and vanpool. Given typical tax rates around 30%, this means buying $325 worth of transit for only $227. That’s quite a deal!
Employers can reach large numbers of frequent transit riders. In Boston, half of all monthly passes are sold through the MBTA’s Perq program, and other large transit agencies report similar participation rates.
More importantly, employer programs successfully drive ridership. SEPTA and Jawnt co-presented a paper at the Transportation Research Board in 2024 titled: Participation and behavior changes in the first year of SEPTA’s Key Advantage institutional pass program. Together, we found that ridership increased more briskly for participants in the SEPTA Key Advantage program than the system overall.
Enrolled employees increased their SEPTA Bus and Metro trips by 40% and Regional Rail by 73% over the 13-month study period, compared to 13% and 32% SEPTA-wide. Analyzing case studies of three larger employers confirmed that employees increased their ridership when the passes were partially subsidized, and increased it even further when their passes were entirely subsidized. Ridership gains slowed or even reversed when subsidies were removed.
SEPTA’s experience is consistent with previous research showing that employer-led programs increase ridership.
If there’s a catch with commuter benefits, it’s that they can only be received through an employer. Employers, or their third party benefit administrator, have to correctly deduct the employee contributions from payroll and certify that the funds are spent on eligible transit and vanpool expenses. If an employer doesn’t want to bother, and there’s no state or local mandate for them to do so, their employees are out of luck.
Fortunately, employers have just as many reasons to support employer benefits as employees and transit agencies. For every $100 that’s removed from their employees’ taxable income, the employer saves $7.65 in FICA and other payroll taxes. Many employers find that, with the right process or vendor, offering commuter benefits can pay for itself.
Employers are often unaware of these opportunities, and increasing awareness is usually the first step.
At a minimum, transit agencies should have a page on their website that describes commuter benefits. Examples include:
This extended guide from 511 Bay Area is helpfully detailed.
Agencies can also produce printed materials about their programs, targeting either employers or employees. Many choose to co-create these materials with business-minded partners, including local Chambers of Commerce, Business Improvement Districts, and Transportation Management Associations. These partners often run events that provide opportunities to table and communicate in-person about commuter benefits.
The MBTA even runs ads in its own system to promote its commuter program.
When employers need to set up a new commuter benefit program, transit agencies can save them a considerable amount of legwork.
Are you with a transit agency and ready to start promoting commuter benefits? Our Partnerships Team is standing by to connect you to your peers at other agencies. Get in touch!
