Illinois Pre-Tax Commuter Benefits Requirement Set to Begin January 1, 2024

With the enactment of the Illinois Transportation Benefits Program Act (HB 2068; P.A. 103-291), the state of Illinois has taken steps towards supporting more widespread use of public transportation services for employees who commute to and from work.

Set to begin on January 1, 2024, employers covered under the new law --- certain employers located within designated Illinois counties and townships, as discussed further below --- will be required to provide a pre-tax commuter benefit allowing covered employees to utilize pre-tax dollars to purchase a transit pass via a payroll deduction. A “transit pass” is defined as any pass, token fare card, voucher, or similar item which entitles a person to commuting via public transportation. Covered employees may elect to exclude from taxable wages and compensation the cost of the transit pass up to the maximum allowable amount under federal law, as per 26 U.S.C 132(f). That amount fluctuates based on annual cost-of-living adjustments, but is currently set at a maximum of $300 per month for 2023. The maximum monthly amount for 2024 has yet to be released.  

In order to meet their obligation under the Act, applicable employers will need to participate in one of the transit programs offered by either the Chicago Transit Authority (CTA) or the Regional Transportation Authority (RTA). “Covered employees” are able to qualify to receive the commuter benefit if they average at least 35 hours of work per week on a full-time basis. Employers must offer the benefit to newly hired employees beginning with their first full pay period following 120 days of employment. By way of additional notice, transit agencies are also tasked with advertising the program and the implementation of this Act to their riders.

For the purposes of the Act, a “covered employer” is an employer that employs 50 or more covered employees and is defined as any individual partnership, association, corporation, LLC, governmental entity, non-profit organization, or business trust that directly or indirectly employs or exercises control over the wages, hours, or working conditions of an employee. The covered employer's address must be located in a geographic area within one mile of a fixed-route transit service station operated by the CTA or RTA in any of these applicable locations:

• City of Chicago and Cook County*; Warren Township in Lake County; Grant Township in Lake County; Frankfort Township in Will County; Wheatland Township in Will County; Addison Township; Bloomingdale Township; York Township; Milton Township; Winfield Township; Downers Grove Township; Lisle Township; Naperville Township; Dundee Township; Elgin Township; St. Charles Township; Geneva Township; Batavia Township; Aurora Township; Zion Township; Benton Township; Waukegan Township; Avon Township; Libertyville Township; Shields Township; Vernon Township; West Deerfield Township; Deerfield Township; McHenry Township; Nunda Township; Algonquin Township; DuPage Township; Homer Township; Lockport Township; Plainfield Township; New Lenox Township; Joliet Township; and Troy Township.

*This includes the entire city of Chicago and the majority of its surrounding suburbs.

Employers operating in any of the above locations should confirm that they meet the Act’s definition of a covered employer and, if so, should start making plans to comply prior to the January 1, 2024 effective date of the new law. As noted, employers will need to look to their geographic location in relation to the transit service stations in the designated areas along with their full-time employee headcount utilizing the 35 hours of work per week metric as specified in the Act. Regarding location, the RTA will be creating a publicly available searchable map of addresses that are located within one mile of a fixed-route transit service in advance of the effective date.