Work location changes deriving from the pandemic notwithstanding, a recent IRS information letter reminds us that account balances from one plan cannot be transferred to another plan.

The IRS was asked whether a qualified transportation program (QTP) account balance could be transferred to a health flexible spending account (FSA). The answer, not at all surprisingly, is no. Qualified transportation benefits are not an eligible benefit under a Section 125 cafeteria plan.

The good news for qualified transportation program participants is that elections can be changed frequently. Unlike with cafeteria plans, a QTP contribution amount election is not locked in for 12 months.

If an employee does not use the full amount of their salary reduction for qualified transportation benefits, the employer can allow any unused amounts to roll over. There is no “cash out” option available for QTPs. Salary reduction amounts designated to a QTP may only be used to reimburse QTP expenses, and cannot be used to reimburse expenses for any other fringe benefit.

It is important for employers to communicate to employees participating in a qualified transportation program that the employee should monitor their needs and adjust their salary reduction contributions as their needs change.

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