Forfeiture of Funds in Qualified Transportation Programs
A recent IRS Chief Counsel Advisory (Number 2019-0002, March 3, 2019) affirms that funds made available through an IRC Section 132(f) qualified transportation fringe benefit program can only be used during employment. Any remaining funds of a qualified transportation program cannot be used or reimbursed to the participant following termination of his/her employment.
As background, an IRC Section 132(f) qualified transportation fringe benefit program can be designed with certain features similar to an IRC Section 125 (cafeteria plan). For example, elections under a qualified transportation program must be made prior to compensation becoming readily available, and the election is irrevocable. Unlike an IRC Section 125 plan in which the election must be made for 12 months, the election under a qualified transportation program can be for a shorter period. It is common, under this type of program, to allow elections to be changed monthly.
This advice provides a good reminder that it is important to communicate, to plan participants, their options to change elections in accordance with the terms of the qualified transportation program, and that any funds not used upon the date of termination of employment, are forfeited.
The information contained in this article is provided as general guidance and may be affected by changes in law or regulation. This article is not intended to replace or substitute for accounting or other professional advice. Please consult a CBIZ professional. This information is provided as-is with no warranties of any kind. CBIZ shall not be liable for any damages whatsoever in connection with its use and assumes no obligation to inform the reader of any changes in laws or other factors that could affect the information contained herein.