Commuter benefits help pay for qualified parking and transit commuter expenses with pre-tax money—not to be spent on health expenses.
If your company offers commuter benefits through a third party, admins can set up benefit deductions.
Choose a section below to learn about eligible employees, eligible expenses, and more.
At a minimum, all full-time employees are eligible to enroll.
Commuter eligibility is separate from medical eligibility. Your company may also choose to offer commuter benefits to:
If you’d like to change your company’s commuter eligibility restrictions, contact us for assistance.
Per the IRS, some people are not eligible to participate in commuter benefits:
The IRS sets a monthly contribution and spend limit for commuter benefits. You can only contribute and spend up to the limit each month.
Parking funds can only be used for parking expenses and transit funds can only be used for transit expenses. Funds cannot be transferred between accounts. Once funds have been deposited into an account, they cannot be removed for anything other than qualified expenses. If the benefit is cancelled or you leave your company, check out the "Use your commuter benefits" section below to learn about your deadline to submit claims.
|Qualified transit expenses
|Qualified parking expenses
|Parking space provided by your employer
|Parking that isn't part of your commute (ex: parking for lunch or at a third-party location, even if it's for work)
|Uber Pool/Lyft Shared (only in select cities)
|Parking at a secondary work location
Some public transit stations may sell miscellaneous items like newspapers, coffee, parking passes, etc. These expenses are unqualified expenses. If your card is declined, you can submit a claim to get reimbursed for qualified expenses only.
Commuter benefits are regulated by the IRS to make sure that the pre-tax dollars are being used on qualified transit expenses.* Some transit vendors—while conveniently located at public transit stations—may sell other miscellaneous items like newspapers, coffee, parking passes, etc. As a result, if your team uses their commuter benefits cards at one of these vendors, they may be spending pre-tax dollars on unqualified expenses.
There are two settings for how to manage these expenses, which will default to Self-Managed upon setup. If you'd like to change this setting to Managed, contact our team.
Option 1: Self-managed
Your team will be able to use their cards at unapproved transit vendors, which could be non-compliant. If the company is audited by the IRS and found in violation, the company and employee(s) may be responsible for paying tax penalties. If an IRS audit does occur, receipts will be required as proof of eligible transit expenses—make sure you or your team keep them if needed down the line. Ultimately, if your team uses their cards compliantly, this is the more convenient option.
Option 2: Managed
We’ll validate the vendors to make sure they’re compliant and approve or deny your team’s transactions when they use their cards. Any kiosks or vendors that sell unqualified products as defined by the IRS will be rejected (this is very common at local commuter stations). This means that your team may be denied expenses and will need to submit claims for reimbursements to use their commuter benefits. While this option is less convenient, it’s more compliant and reduces the risk of penalties.
If you'd like to change your settings, contact us from the Help or Priority support section of your Gusto account.
*Specifically reference question 16
Your full election amount is available for you to use on the first of each month. You can spend up to the IRS limit each month.
Employee contributions are deducted pre-tax from payroll.
Deductions for any given month are evenly distributed across each payroll with a check date in that month. Ex: If you contribute $200 a month and your company's check dates are on the 15th and the 30th of each month, you'll be deducted $100 on each check date.
Exception: If payroll is processed in the month before the check date, any scheduled catch-up deductions will be taken, but regular deductions will not be taken. Regular deductions will be evenly distributed across the remaining check dates for that month.
Employee deductions and company contributions remain in the company bank account until employees use their funds. Money only leaves the company bank account when an employee swipes their card or submits a claim.
Each day, the sum of all employee’s commuter disbursements are debited from the company in one lump sum. These are debited as "MBI" or "Med-I-Bank."
On the first of each month, benefits admins receive an employer disbursement report via email. This report lists all the previous month's individual transactions and claims, and you can use it to reconcile the debits.
Any unused funds roll over to the next month. There's no limit to how much can accumulate, but you can only spend up to the IRS limit each month and you cannot move funds between parking and transit accounts. You can change your contribution each month, so if you have extra funds to spend, you can decrease your contribution limit.
Some cities have laws around commuter benefits that companies may have to follow based on where their business is located. It’s also best to check local and state laws to make sure you're complying with any requirements.
If you operate in any of these cities, your employees do not have to take advantage of the benefit, but you are required to offer it.
Here are some of the cities with known commuter benefit laws:
|Requirements apply to companies with...
|10+ full-time employees
|New York City
|20+ full-time employees
|10+ employees who work an average of at least 10 hours per week
|San Francisco, CA
This is not an exhaustive list. It’s also best to check local and state laws to make sure you're complying with any requirements.
When an employee sets aside pre-tax money for commuter benefits, their gross taxable income is lowered. Since employers are taxed for FICA on the amount an employee earns, employer taxes are also reduced.
Here's everything you need to know about setting up commuter benefits for your company.
Here is the pricing for your company to offer commuter benefits:
If you already offer commuter benefits and manage them externally, you can transfer them to Gusto or set up payroll deductions.
You can start offering commuter benefits to your team anytime throughout the year by following the steps below. The benefits will begin two calendar months later, on the first of the month (ex: if you finalize the benefit in Gusto on any day in January, the plan will start on March 1st).
Once you’ve finished adding the commuter benefits, we'll email you with the effective date and we'll notify your eligible employees to enroll.
Unlike most other benefits, your team can enroll, cancel, or change their commuter benefit elections anytime throughout the year.
If your company currently offers commuter benefits, follow the steps below to transfer them to Gusto.
Once you finish adding info about your company's commuter benefits, we'll reach out with next steps to transfer them to Gusto.
Eligible employees can enroll in commuter benefits or change their contributions anytime throughout the year.
Your benefits start date depends on when you enroll:
Follow these steps to enroll in commuter benefits from your Gusto account.
Your Gusto Benefits Card will be sent to your mailing address in a plain white envelope before the benefits start date. Follow the steps below to register for the Gusto Benefits Card Manager, where you can track your balance and submit claims.
If you need to change your election, you can do so anytime throughout the year by following the steps in the "Manage your commuter benefits" section below.
Commuter benefit funds can be used on either transit or parking expenses, by swiping your card or entering your card number for an online purchase. If purchasing online, the billing address is your home address.
Remember: the IRS monthly maximum is both a contribution and usage limit. This means you can only contribute up to the limit each month, and you can only spend up to the limit each month. The monthly usage limit is determined by a service's purchase date, not the date you submit the claim.
How to use transit funds
You can use transit funds to commute between your home and primary place of work.
How to use parking funds
You can use parking funds to park at your primary place of work or at your transit location.
Once you receive your card in the mail, you can add it to your mobile wallet. Choose your phone provider for instructions:
If you use your card for the first time by swiping it or using mobile pay in person, the card is automatically activated. If your first use of the card is an online transaction, follow the steps below to activate it first.
If you need help adding your card to your mobile wallet, contact your mobile wallet provider.
Swiping your card at a physical location will automatically activate it.
If your first use of the card is an online transaction, follow these steps to activate it first:
If your company offers multiple benefits savings accounts through Gusto and you enroll in more than one, you will use the same Gusto Benefits Card for all transactions. For example, if you enroll in both commuter benefits and an FSA, you'll use the same Gusto Benefits Card for eligible commuting and medical expenses. Eligible claims and transactions are automatically drawn from the correct account.
Your Gusto Benefits Card should be used as a credit card, though some vendors require a PIN. How's how to find it:
If your Gusto Benefits Card has been misplaced or stolen, report it as soon as possible with these steps:
If you don’t have the option to issue another card to yourself, reach out to [email protected] and we'll issue you a new Gusto Benefits Card.
If you find a transaction that you did not complete yourself and you believe to be fraudulent, here's how to dispute it.
Note: If you recognize the transaction but the service provider charged the wrong amount, contact your provider directly to discuss the transaction.
If the dispute is approved, you should see a refund on your account within 55 days.
To register for the Gusto Benefits Card Manager (GBCM) for the first time, follow the steps below.
Once you're registered, you can access your Gusto Benefits Card Manager at this link or from the Benefits tab of your account.
If you've left your company and didn’t register for your Gusto Benefits Card Manager account during your employment, reach out to [email protected] for your sign-in credentials.
Make sure your receipt is a PDF without special characters in the title and includes:
Important: To submit a transit claim, you must have attempted to use your card first. Only claims submitted after a denied transaction on the same day, for the same amount, and at the same vendor can be approved. Parking claims do not have this requirement.
You can review transactions, submit claims, and more in the Gusto Benefits Card Manager. If you need to register for the Gusto Benefits Card Manager, follow the steps above.
Submit a claim
Follow these steps to submit a receipt for reimbursement:
We’ll let you know once your claim has been approved or denied. To avoid a denied claim, make sure you’re using your card only for eligible expenses.
When you'll be reimbursed
If your claim is approved, we'll email you to ask if you want to be reimbursed with a check or by direct deposit. A check will arrive at your mailing address in 7–10 days. If you choose direct deposit, it will appear in 3–5 business days. It will be sent to the bank account listed under “Reimbursement Details” in your Gusto Benefits Card Manager and it will appear as an MBI or Med-I-Bank credit.
Need to submit claims after leaving your company?
If your benefit has a runout period, you may have extra time to submit claims for qualifying expenses incurred during your employment.
If you didn’t register for your Gusto Benefits Card Manager account during your employment, reach out to [email protected] for your sign-in credentials.
If you need to spend your commuter benefits card at an unauthorized transit vendor, follow these steps to get reimbursed:
The IRS requires that you purchase transit passes with your pre-tax commuter card only at authorized transit vendors, which are vendors, kiosks, or machines that sell transit passes only. If you try to purchase your transit pass at Walgreens, Whole Foods, or any merchant that sells anything other than transit passes, it will be denied. For more on the IRS regulation, check out these resources: IRS Publication 15-B and Section 132(f) of Internal Revenue Code.
CalTrain and BART station machines are unauthorized vendors because you can also buy parking passes at these kiosks.
For BART, CalTrain, Muni and many other transportation resources in the Bay Area, we recommend that you autoload a Clipper Card online.
Washington D.C.‘s WMATA SmarTrip and Baltimore’s Charm Card are unauthorized vendors because the funds loaded into those accounts can be used to pay for ineligible expenses, such as parking. If you need to use your commuter card in the D.C. or Maryland areas, follow the steps in the dropdown below to submit a claim for an unauthorized vendor.
As of May 2023, Lyft and Uber are no longer eligible commuter expenses. Both Lyft and Uber discontinued their vanpool programs in early 2023, making their services ineligible for commuter benefits.
If you cancel your plan or leave your company, you may have extra time to submit claims. Choose a section to learn more.
If your company stops offering commuter benefits through Gusto or you cancel your own plan, you have until 90 days after the last day of the plan to submit claims for expenses incurred during the plan period.
Claims can be submitted for out-of-pocket transit expenses only if the first attempt was made with the Gusto Benefits Card and the transaction was denied.
90 days after the last day of the plan, any unused funds will be forfeited back to the company (as set by Section 1.132-9(b) Q&A 14(d) of this IRS document).
If you leave your company and were enrolled in commuter benefits, the plan will end on your last day of employment. You have 90 days after the last day of employment to submit a claim for services incurred while the policy was active (you can find instructions under the "Use your commuter benefits" section above). Claims can only be submitted for transit expenses if the first attempt was made with the Gusto Benefits Card and the transaction was denied.
90 days after the last day of employment, any unused funds will be forfeited back to the company (as set by Section 1.132-9(b) Q&A 14(d) of this IRS document).
Choose a section below for more ways to manage your commuter benefits.
Employee deductions and company contributions remain in the company bank account until employees use their funds. Money only leaves the company bank account when an employee swipes their card or submits a claim. Each day, the sum of all employee’s commuter disbursements are debited from the company in one lump sum. These are debited as "MBI" or "Med-I-Bank."
On the first of each month, we email an employer disbursement report to benefit admins. The report lists all the previous month's individual transactions and claims so you can use it to reconcile the debits.
You can change your commuter benefit elections at any time once your benefit is active. If this is your first enrollment and you've already submitted the amount, reach out to our team at [email protected] to make the change.
Changes must be submitted 2 days before the last of a month in order to take effect on the first day of the following month. For example, if you want changes to take effect May 1st, submit your change in Gusto by April 28th.
Follow these steps to change your commuter benefits contribution:
You can cancel your commuter subscription at any time. If you have a current balance, you will have 90 days after you end the policy to submit claims for services incurred while the policy was active. After the 90 days, any remaining funds will be forfeited to the company and are not reimbursed—even if they were employee-funded.
To avoid forfeiting the funds, reduce the contribution amount instead of canceling the enrollment. This buys you time to use the balance in the account before terminating the policy, without having to put much more money in it.
If you no longer want to offer commuter benefits, contact us from the Help or Priority support section of your admin account.
The termination will take effect at the end of the current month. Here are things to keep in mind: