There are several ways that employers can provide this employee benefit:
Employer-paid—The employer directly subsidizes the cost of transit,
typically by providing a transit pass or voucher to employees; the amount
of the benefit is free of payroll taxes for the employer and employee, and
the employee pays no federal income taxes on the benefit.
Employee-paid—Also called a pre-tax deduction, the employer allows
the employee to reserve income on a pre-tax basis for transit costs. The employer
saves payroll taxes on the reserved income and the employee saves payroll
and federal income taxes.
Combination of the two—The employer covers part of the cost of transit,
and allows the employee to pay for the remainder with pre-tax income.