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October 1, 2021

Seattle Washington employers must allow employees to make pretax contributions for transit or vanpool expenses

In an effort to reduce traffic and carbon emissions from single-occupancy vehicles, the Seattle City Council enacted Ordinance SMC 14.30 which, effective January 1, 2020, requires that Seattle businesses with 20 or more employees offer their covered employees an option to make pretax contributions for the costs they incur for transit or vanpool expenses (but not parking expenses). The Seattle Office of Labor Standards (OLS) began enforcement of the ordinance on January 1, 2021.

The ordinance does not apply to employers with fewer than 20 employees worldwide, nor does it apply to tax-exempt organizations and government agencies.

Required commuter benefits

Under the law, the employer is required to provide qualified transportation fringe benefits as set forth under IRC Section132(f) which includes the requirement that employees be given the option to pay for their transit or vanpool expenses with pretax contributions. Employers may partially or wholly subsidize the cost of these benefits. (Seattle OLS, frequently asked questions.)

Employers can administer this program on their own or they can work with King County Metro or any other third-party benefits administrator.

An employer offering a subsidized transit pass instead of the pretax deduction option must subsidize the pass with a monthly amount that is equal to or greater than 30% of a retail monthly transit pass based on the fares charged by King County Metro and Sound Transit Link Light Rail. In 2021, that amount is 30% of $117/month, or $35.10 per month. These amounts are subject to change based on rates established by King County Metro and Sound Transit Light Rail. An employer may satisfy the requirements of the Ordinance by offering a transit pass through the ORCA Business Passport Program, which requires an employer to pay for at least a 50% of a discounted annual transit pass.

Covered employers

In determining if an employer has 20 or more employees worldwide, the business calculates the number of employees by counting the average number of employees who worked for compensation each calendar week during the prior calendar year. In this process, businesses must:

  • Count all employees worldwide
  • Count employees of all employment statuses (full-time, part-time, interns, seasonal, temporary, employees supplied by a placement agency, etc.)
  • Include any week during which at least one employee worked (employers should not include weeks in which no employees worked)

Employers with no employees during the previous calendar year count the average number of employees employed per calendar week during the first 90 calendar days that the employer engaged in business.

If the average number of employees who worked for compensation each week in the prior calendar year does not meet 20, an employer is not required to provide commuter benefits to their employees beginning in the new calendar year. However, an employer may voluntarily comply.

Covered employees

The ordinance applies to an employee if they worked at least an average of 10 hours per week in the previous calendar month.

To calculate an employee's average weekly hours in the previous calendar month, determine the number of complete seven-day workweeks in that previous calendar month. The workweeks could be based on how an employer already defines their workweek to calculate overtime pay. This number will either be three or four workweeks, depending on the month. Determine the total number of hours worked for all complete seven-day workweeks during the previous calendar month and divide by the number of complete workweeks.

The ordinance covers employees who work in Seattle, regardless of where they live and may apply to employees who only occasionally work in Seattle if they worked in Seattle an average of 10 or more hours per complete workweek in the previous calendar month.

The requirement also applies to teleworkers if they work an average of 10 or more hours per week in Seattle; however, the employer may choose not to make a payroll deduction if they do not incur commuting expenses.

Employee notice requirement

Covered employers must display a poster that gives notice of an employee's rights to exclude commuting costs incurred for transit or vanpool expenses from their taxable earnings. Employers must display the poster in English and in the primary languages of the employees at the workplace. OLS incorporated information about the Commuter Benefits Ordinance into the existing 2021 Workplace Poster.

Ernst & Young LLP insights

Seattle joins several jurisdictions that require employers provide transportation fringe benefits to their employees.

For instance, New Jersey Governor Phil Murphy approved legislation under SB 1567 that requires employers of 20 or more employees to offer pretax transportation fringe benefits to New Jersey employees. More information is available here.

And, under the New York City Commuter Benefits Law, non-governmental employers with 20 or more full-time non-union employees working in New York City must offer their full-time employees the opportunity to use pretax income to pay for their transportation by public or privately owned mass transit or in a commuter highway vehicle (does not include parking expenses). Employers are not required to subsidize the cost of transit benefits but are required only to give employees the option to purchase qualified transportation fringe benefits with pretax dollars. (LocallawsoftheCityofNewYork,Section 20-926; NYCCommuterBenefitsLawFAQs.)


Contact Information
For additional information concerning this Alert, please contact:
Workforce Tax Services - Employment Tax Advisory Services
   • Kristie Lowery (
   • Kenneth Hausser (
   • Debera Salam (


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