Starting January 1, 2024, a new Illinois law will require employers in the greater Chicago metropolitan area with 50 or more covered employees within one mile of a fixed-route public transit service to provide their full-time employees with pre-tax public transit benefits.  This type of benefit program allows eligible employees to elect pre-tax reductions from their pay to purchase transit passes for use in commuting to and from work.  Transit passes covered by the program include fare cards and passes for public transportation. 

Covered Employers

The new law applies to employers with 50 or more covered employees in one of 38 designated counties and townships (see list below) within one mile of a fixed-route transit service (bus or rail) operated by the Regional Transportation Authority (RTA).  The RTA’s operating units consist of the Chicago Transit Authority (CTA), Metra and Pace.

Covered Employees

The law defines “covered employees” as those working an average of at least 35 hours per week.  Under the law, the benefit must be offered to covered employees beginning no later than an employee’s first full pay period after completing 120 days of employment.  A limited exception exists for employees covered under a collective bargaining agreement in force on the law’s effective date, January 1, 2024.

Scope of Mandated Benefit

The law only mandates the offering of transit passes on a pre-tax basis.  Employers may, but are not obligated to, offer other qualified transportation benefits under the program established, including commuter highway vehicle (e.g., van pool) and qualified parking expense reimbursement. 

To provide these benefits on a pre-tax basis, an employer’s program must be designed and operated in accordance with certain requirements under the Internal Revenue Code.  Typically employers utilize a vendor to provide pre-tax transportation benefits, such as their payroll provider or flexible spending account provider.

What to Do Now

Covered employers should check with human resources to confirm they offer a pre-tax transportation benefit program that complies with the Illinois law.  If not, employers should consider utilizing their payroll provider or other vendor to offer such a program by January 1, 2024.

Covered Geographic Area

The counties and townships covered by the law consist of 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.

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Photo of Christopher T. Collins Christopher T. Collins

Christopher T. Collins is Chair of the Executive Compensation & Employee Benefits group. He assists employers on all aspects of employee benefits, focusing on retirement and welfare plan design, qualification and compliance. He frequently advises employers regarding benefit issues in connection with mergers…

Christopher T. Collins is Chair of the Executive Compensation & Employee Benefits group. He assists employers on all aspects of employee benefits, focusing on retirement and welfare plan design, qualification and compliance. He frequently advises employers regarding benefit issues in connection with mergers and acquisitions and U.S. Department of Labor and Internal Revenue Service correction programs.

Photo of Thomas G. Hancuch Thomas G. Hancuch

Thomas G. Hancuch is a Shareholder at Vedder Price, representing employers in all aspects of employee benefits, labor and employment law.

Thomas G. Hancuch is a Shareholder at Vedder Price, representing employers in all aspects of employee benefits, labor and employment law. His…

Thomas G. Hancuch is a Shareholder at Vedder Price, representing employers in all aspects of employee benefits, labor and employment law.

Thomas G. Hancuch is a Shareholder at Vedder Price, representing employers in all aspects of employee benefits, labor and employment law. His practice focuses on employee benefit plan design and administration, including ERISA, Internal Revenue Code, and Affordable Care Act compliance; benefit claims and litigation; employee relations and benefits aspects of mergers, acquisitions, workforce reductions and outsourcing; severance and exit incentive programs and agreements; remote and hybrid work arrangements; leaves of absence and accommodation of employees with disabilities; employment discrimination, harassment and retaliation claims; employee leasing and worker classification; executive compensation; wage and hour laws; employee discipline and discharge; and other human resources matters.