Smart Card for Pretax Travel

Millions of Americans use mass transportation to commute to work. In 1998, Congress decided to help those Americans pay for their commute—and thereby support mass transportation and possibly win a few votes as well—by allowing employees to set aside pre-tax dollars for commuting costs. At that time, Congress set the monthly pretax limit at $65, but the limit will rise to $100 on January 1, 2002. The scheme also serves to reduce the base on which employees' and employers' social security contributions are based.

Businesses with hundreds of employees find that it is cumbersome and costly to make these pretax funds available to employees and to assure that they are used for public transportation, as required by the statute. Happily, there appears to be at least one solution to this dilemma, according to ATM &Debit News, as reported in CardLine. The M&T Bank (Buffalo, NY) is issuing an eTrac card. Total System Services, Inc. (Columbus, GA) processes transactions on the card. Under this program, employees tell their employer how much they want taken out of their paycheck in pre-tax dollars (subject to the limit of $65 per month). These funds are then credited to the employee's personal account within the company's eTrac account. An employee can check the balance in his or her eTrac account by going to a dedicated web site. An employee whose costs of public transportation exceed $65 per month may choose to have the employer add after-tax funds to his account as needed.

Since the card is a MasterCard product, it can be used at any place that accepts MasterCard. However, the card may be used only for the purchase of mass-transit tickets at authorized mass-transit retailers. eTrac balances that are not used in one month can be carried forward to later months, but must be used only for the approved purpose. In the meantime, the bank is happy to hold the deposits.