New Qualified Transportation Fringe Benefit Added for Bicycle Commuters

November 5, 2008

On October 3, 2008, President Bush signed into law, as part of the Emergency Economic Stabilization Act of 2008, a qualified transportation fringe benefit for bicycle commuters.  This new law expands Code Section 132(f) by allowing employers to reimburse employees up to $20 per month for bicycle commuters.  This new fringe benefit is effective January 1, 2009.

This benefit can only be paid by the employer and employee salary reduction contributions will not allowed to pay for the benefit.  The employer may reimburse up to $20 per month for reasonable expense incurred by an employee for the purchase of a bicycle and bicycle improvements, repair and storage, if the employee regularly bikes to work during that month. Employees can receive the bicycle reimbursement for a for  particular month, other qualified transit benefits, but not both.

An employer can offer this benefit in a number of ways including reimbursement of receipts, regular monthly payment or under a voucher system.  The Internal Revenue Service (“IRS”) should release guidance shortly.