The Philadelphia obligation almost nobody knows about
Of all the Philadelphia employment rules, this is the one we most often find unmet — and usually because nobody in the company knows it exists.
The Employee Commuter Transit Benefit Ordinance took effect on 31 December 2022. It requires employers with 50 or more covered employees to offer a commuter benefit program.
It does not look like an employment law, it sits with benefits rather than HR, and it arrived quietly.
Who it applies to
50 or more covered employees. A covered employee is someone who works 30 or more hours a week within Philadelphia for the same employer, and has done so over the previous 12 months.
Read that carefully, because two things follow.
It is your Philadelphia headcount, not your total. A 300-person company with eight people in the city is not covered. A 60-person company with all of them in the city is.
You do not have to be headquartered here. Fifty covered employees working in Philadelphia is enough. If you are a New York or Delaware company with a Philadelphia office, the obligation is yours.
Government employers are excluded. Unpaid interns, volunteers and unpaid apprentices are not covered employees.
What you have to offer
At least one of the following:
A pre-tax payroll deduction for mass transit expenses and qualified bicycle expenses, under Internal Revenue Code §132(f). Employees set aside their own money before tax — in 2026, up to $340 a month.
An employer-paid benefit — a fare instrument such as a transit pass, at a value at least equal to the federal maximum exclusion.
Or a combination of the two.
The pre-tax option costs the employer almost nothing. The money is the employee’s; the mechanism is payroll. And because pre-tax deductions reduce taxable payroll, employers generally see a modest FICA saving.
The penalties
An employer found non-compliant gets 30 days to fix it, followed by a written warning. Continued non-compliance carries a fine of $150 to $300 per day.
Per day is the part worth noticing. This is not a one-off penalty; it accrues.
Why it gets missed
Three reasons, and they compound.
It is a benefits obligation in an employment ordinance. Benefits sit with a broker; employment compliance sits with HR or whoever inherited it. This falls between them.
The threshold is a Philadelphia headcount, which is not a number most companies track separately. Payroll knows total headcount and work location, but nobody is watching for the moment city-based staff crosses 50.
It arrived at the end of 2022, when most companies were preoccupied with return-to-office questions rather than local ordinance reading.
What to do
Count your Philadelphia 30-plus-hour employees. Not total headcount. If you are anywhere near 50, this needs a decision.
Ask your payroll provider. Most major platforms support pre-tax commuter deductions natively. This is frequently a configuration task rather than a new vendor.
Or ask your benefits broker, who may already have a commuter product available.
Document what you offered and when. As with most of these, the record is the defense.
Watch the threshold as you grow. A company at 45 covered employees is one hiring round away.
Worth doing even below 50
The pre-tax benefit costs the employer little, saves the employee real money — a few hundred dollars a year depending on fare and tax bracket — and is a genuine recruiting point in a city where a meaningful share of the workforce uses SEPTA.
If you are at 40 covered employees, setting it up now means the obligation arrives already satisfied.
We look at this as part of benefits and PEO coordination, and it sits within the wider set of local rules covered under multi-state compliance.
This is general information, not legal advice. Specific situations should be reviewed with employment counsel or your benefits adviser.