“This is not only going to mess up the Metro budget, but is going to wind up costing commuters more money since they can’t use pretax funds.”

Photo by PoPville flickr user Eric P.

“Dear PoPville,

This isn’t the most exciting news on the planet, but does involve something that could torpedo WMATA’s budget.

ADP, which a lot of private sector companies use to handle employee benefits, sent a notification out yesterday that they will no longer support commuter spending accounts starting in 2016. This means that employees can’t have money taken out of their paychecks pretax and then used to pay for bus and train use. ADP hasn’t been able to work with WMATA on fixing this, so the IRS is essentially shutting it down.

This is not only going to mess up the Metro budget, but is going to wind up costing commuters more money since they can’t use pretax funds.

Here’s the email that ADP sent:

IMPORTANT UPDATE: Commuter Spending Accounts in the Washington, DC Area

Earlier this year, we communicated that restrictions on the use of prepaid debit cards meant that the ADP Commuter Spending Account (CSA) Debit Card could no longer be accepted by the Washington Metropolitan Area Transit Authority (WMATA). Since that time, our dedicated Spending Accounts Compliance Team has thoroughly reviewed all options and confirmed that the ADP CSA Debit Card cannot be configured to purchase WMATA products and maintain compliance with the current, applicable guidance. As a result, WMATA commuters are unable to use the ADP CSA Debit Card. Please be sure to carefully review this announcement as it provides important updates and deadlines for your CSA program.

In our initial communication, we also advised that participants using WMATA could pay out of pocket for their transit products and file claims for expense reimbursement from their pre-tax account. However, IRS Revenue Ruling 2014-32 disallows cash reimbursement of transit expenses incurred after December 31, 2015 if a transit debit card is “readily available”. Since WMATA offers a “readily available” transit debit card, ADP will not be able to process any transit claim submissions for expenses incurred after December 31, 2015. Participants will, however, still have the option of filing claims for reimbursement of parking expenses that were paid out of pocket.

It is our suggestion that you take action to use your full, available commuter transit balance prior to December 31, 2015. You may do this by reducing or eliminating your per-pay-period deduction and/or by submitting any claims for reimbursement of out-of-pocket expenses to ADP with dates of service through December 31, 2015. When submitting claims for reimbursement, please visit the ADP Spending Account website to confirm any claims filing deadlines.

Effective January 1, 2016, ADP will no longer be able to process reimbursement claims for new, out-of-pocket commuter transit expenses. If you are unable to submit claims for reimbursement and have a balance remaining afterDecember 31, 2015, we will work with your employer to determine any available options.

We realize that this represents a challenge for you and ADP is committed to answering your questions. You may contact your ADP Participant Solution Center for assistance.

We look forward to assisting you!”

34 Comment

  • In dire need of someone to ELI5 this right now. I don’t have any sort of ADP debit card, but my company uses ADP. Does this apply to everyone? And why would we have to spend down our balances? Just sent off a worried email to HR too, and can report back if I hear anything.

  • “Since WMATA offers a ‘readily available’ transit debit card, ADP will not be able to process any transit claim submissions for expenses incurred after December 31, 2015.”

    So…why don’t employers just use this readily available transit debit card when ADP stops doing what they’re doing?

  • Can an employer use ADP to process payroll and also participate in SmartBenefits?

    • Yes. I’ve worked at several places where the businesses do this.

      This ADP/WMATA situation complicates things for employees who are using their own money, pre-tax, to pay for public transportation. It doesn’t really affect anyone who just uses extra money their employer gives them (e.g. via SmartBenefits) to commute on public transportation, and who doesn’t care about using their own money, pre-tax, to pay to use public transportation.

    • Yes. My company uses ADP for both. I imagine that we’ll have to move to some other vendor to handle the Smartbenefits component since ADP is no longer going to support it.

  • I don’t understand this, but also irrespective of this, DC businesses with more than 20 employees now are required by law to offer smartbenefits, yes? http://www.wmata.com/business/employer_fare_program/transit_benefit_ordinance.cfm

    • It looks like it requires them to offer some kind of public transportation or biking benefit, but if I read it correctly, they could simply offer to pay for BikeShare for employees, for example. They wouldn’t have to offer any sort of WMATA program at all.

  • equally confused!

  • I wonder if this is why the DC Government is switching providers for its employees for 2016? As of now, we use ADP, but we just got a notice of the plan to switch last week.

  • Tsar of Truxton

    I don’t see how this would impact WMATA’s budget. Is the suggestion that because commuters lose the tax break, they will just start driving instead? That seems unlikely except in rare cases. It does suck for commuters to lose the benefit though.

    • When federal government employees saw their transit benefit reduced people stopped using the Metro as much. I remember seeing a graph that showed when Metro ridership dropped off over the course of the month, and the drop off occurred at the point at which the benefit ran out. There are a number of articles on this, and I think that GGW did a series on it as well.

  • I’m an HR professional, and my company offers a pre-tax transit benefit. Staff have the money for their qualifying transit fares taken out of their paychecks on a pre-tax basis. Their benefits automatically load when they pass through a Metro fare gate on or after the first of the month.

    In my company, HR must process the payroll deductions, and then use the WMATA web site for the benefit processing itself. Based on the ADP correspondence copied above, it sounds like ADP is discontinuing debit cards and reimbursements. Your employer, however, could still provide a pre-tax transit benefit by managing it directly with WMATA. WMATA is cumbersome, and the customer service tends to be poor, but it is better than nothing.

    • I’ve worked for a company that dealt directly with WMATA rather than go through ADP and everything worked fine. It’s surprising that a company the size of ADP hasn’t been able to figure things out, especially since it sounds like a technology issue more than anything else.

    • This is the system I’ve used too. ADP can’t/won’t directly interface with WMATA anymore (which I didn’t even know it could do), but employers I presume can still do pre-tax deductions from pay, and then move that money into Smartbenefits via Autoload. Honestly, I’d presume that’s what most peoples’ employers do… maybe this other thing was a shortcut for big companies because the SmartBenefits website is a horrible mess and a pain to use for anything bigger than about a medium-sized business? Though I think you can still do, like, bulk uploads in SmartBenefits, right?

      Ultimately, nobody is going to lose pre-tax benefits. If your employer is big enough to be impacted by this, then they’re big enough to be required to offer the benefit, and they’ll just have to do the process manually.

      • I’m not disagreeing on the larger point that it’s likely people probably won’t be affected, because pre-tax benefits are popular and employers will continue to offer them. However,I don’t think larger businesses are required to offer pre-tax benefits specifically. They could simply elect to provide vanpool or biking benefits, or give everyone employer-paid SmartBenefits (which are capped by federal guidelines at $130/month, which goes faaaaaast on Metro).

        • The way I’m reading the new law, you can’t only provide vanpool and biking benefit; transit is part of that section and employers with over 20 employees will be required to offer those benefits either pre-tax or, as you say, employer-paid (though I doubt employers would opt to pay rather than do pre-tax deductions in response to this; they’d just continue to do so if they had already).

      • I understood it to mean that only big companies in DC are required to offer pre-tax transit benefits. That doesn’t apply to most of us, whose employers are based in Md or VA,

  • I think this post is a little over the top (particularly the title) and doesn’t explicitly state that this only applies to companies that us ADP debit cards and DOES NOT apply to the hundreds of thousands of people that have pre-tax transit benefits taken out and put directly on their smarttrip cards. In fact, in the first paragraph it says just that which is wrong.
    I think the post should be revised to state the correct info so people are necessarily stressed out and go away thinking their pre-tax transit benefit is going away.

    • The issue applies to people whose companies use ADP to handle the pretax benefit payments. Companies who do use ADP now have two months to figure out how to fix things, and as an earlier comment indicated a company can work directly with WMATA. If your company uses ADP to handle Metro benefits and doesn’t have its act together an employee is going to be out of luck come January. I don’t know how many people use ADP for this sort of thing compared to those who don’t, but this is an issue that thousands of people are now facing – out of the blue – as of yesterday.

      • But, and I might be going out on a limb, but my guess is that the majority of private-sector employees in DC who have ADP handling their pay won’t be affected by this, because the company uses ADP to make pre-tax deductions, and then pays the money over to WMATA itself. I didn’t even know the other was an option, and I’m guessing it’s an enterprise-level thing that ADP is communicating directly with companies about. Those employers will have to switch systems, but I doubt anyone is going to jump ship from ADP over this, and I doubt that many (if any) employees will actually see a hiccup in all of this. Though I guess if you had a really, really, really shitty HR department… I’m still guessing that ADP is sending those HR departments very specific instructions on how they should handle WMATA going forward. So I agree with also anon that there is a very, very overblown level of panic accompanying this whole thing, and it’s causing a lot of people to worry who absolutely have no reason to.

        • Yes this is what I was trying to say but you said it much more eloquently.

        • Yes and now Unsuck DC Metro just shared this post on Facebook so now even 10x more people are going to be confused and misinformed.

          • Luckily that website tends to be a bit of an echo chamber. I don’t think that the post misinformed people, though it probably is a bit dramatic. If your company uses ADP to process Smartbenefits then they hopefully will figure something out.

  • Ashy Oldlady

    How much money does the average gov employee save by paying Metro fares pretax? Is it really that much?

    • The average government employee actually rides metro for free since the government gives them free metro fare and yes it is a lot of money. I’m a private sector employee and pay about $125-150 a month for my commute out of my own pocket. Pre-tax helps but only about 25-30%.

      • Technically, it’s not ‘free’ per se, it is an untaxed benefit, like health insurance, that is taken out before taxes. A lot of companies actually do this.

    • Yeah my girl works for the feds, and she rides for free. Her card is loaded automatically on the 1st of every month.

  • What about WageWorks (https://www.wageworks.com/). My company uses them for pre-taxed transportation benefits. I’ve used them for 10 months now and they’re perfect.

Comments are closed.