The Illinois Transportation Benefits Program Act requires certain Chicago-area employers to let full-time employees buy transit passes with pre-tax payroll dollars, up to the federal monthly limit. The law took effect January 1, 2024 and is codified at 820 ILCS 63.1Illinois General Assembly. Public Act 103-0291 – Transportation Benefits Program Act It is not a statewide mandate, and it does not force employers to pay for anyone’s commute. It requires a payroll mechanism, nothing more.
Which Employers Are Covered
Two conditions must both be true. The employer must sit in a designated geographic area, and it must have 50 or more covered employees at an address within one mile of fixed-route transit service.2Illinois General Assembly. 820 ILCS 63 – Transportation Benefits Program Act
The designated area is all of Cook County plus specific townships in Lake, Will, DuPage, Kane, and McHenry counties. That sweeps in communities like Naperville, Aurora, Elgin, Joliet, and Waukegan, not just the city of Chicago. Employers commonly miss this. If your office is in a covered township but more than a mile from any bus or rail line, you are not covered. If it is within a mile of transit but has fewer than 50 full-time employees at that address, you are not covered either. Both tests apply.
The definition of employer is broad. Corporations, partnerships, LLCs, nonprofits, and government entities all fall inside it.1Illinois General Assembly. Public Act 103-0291 – Transportation Benefits Program Act
Which Employees Qualify
A covered employee is one who works an average of at least 35 hours per week for compensation on a full-time basis. Part-time workers are not covered. Eligibility begins on the employee’s first full pay period after 120 days of employment, so new hires have a waiting period built into the statute.1Illinois General Assembly. Public Act 103-0291 – Transportation Benefits Program Act
The act does not address hybrid or remote workers directly. Under general federal treatment of commuter benefits, the pre-tax exclusion attaches to actual commuting, so a hybrid employee uses the benefit for the days they travel to the workplace. Employers have room to structure the offering around varying schedules.
What the Benefit Actually Is
Covered employers must offer a pre-tax payroll deduction that lets eligible employees buy transit passes with pre-tax dollars. Those purchases are excluded from taxable wages up to the maximum permitted under 26 U.S.C. ยง 132(f).1Illinois General Assembly. Public Act 103-0291 – Transportation Benefits Program Act
Qualifying passes include any pass, token, farecard, or voucher that entitles the employee to mass transit at regular or reduced price. That covers the CTA, Metra, and Pace.3Office of the Law Revision Counsel. 26 USC 132 – Certain Fringe Benefits
What the Act Does Not Require
The law does not mandate that employers pay for transit passes. The money still comes out of the employee’s paycheck; the employer’s obligation is to run it through payroll pre-tax. The act also does not require vanpool subsidies, parking benefits, or bicycle commuting reimbursements. Employers can offer any of those voluntarily, but state law does not compel it.
The 2026 Monthly Limit
For 2026, the pre-tax exclusion for qualified transit and vanpool benefits is $340 per employee per month, up from $325 in 2025.4U.S. Department of Transportation. TSB 2026-02 DOT Transit Benefit Increase to $340 An employee who uses the full amount shelters up to $4,080 per year from federal income tax and FICA.
The savings run in both directions. The employee reduces taxable income; the employer avoids matching Social Security and Medicare tax on every pre-tax dollar. For an employee in the 22% federal bracket, the full monthly benefit is worth roughly $100 or more per month once federal income tax, FICA, and state income tax are counted.
How to Comply
The simplest route is to enroll in a transit benefit program offered by the CTA or the Regional Transportation Authority. Those programs handle most of the administrative work. Employers who prefer to run the benefit in-house set up a pre-tax payroll election: the employee chooses an amount each pay period, the deduction reduces taxable wages, and the funds go toward transit pass purchases.1Illinois General Assembly. Public Act 103-0291 – Transportation Benefits Program Act
Keep records of enrollment and deductions. You need them for state compliance and to substantiate the federal tax treatment.
Penalties
The act includes penalty provisions for noncompliance, though the specific enforcement agency and fine amounts are not spelled out in the publicly available statutory text. The law sits in the Employment chapter of the Illinois Compiled Statutes, which points toward a role for the Illinois Department of Labor, but the act itself does not say so expressly. An employer near the edge of the geographic area or the one-mile transit boundary should get a legal read rather than assume the law doesn’t reach them. Standing up a pre-tax payroll deduction is a low-cost fix compared to defending a noncompliance claim.
What This Means If You Are an Employee
If your employer offers the pre-tax transit deduction and you commute on the CTA, Metra, or Pace, opting in lowers your tax bill with no offsetting cost. The money still comes out of your own paycheck. Shielding that spending from federal income tax and FICA is where the savings come from, and at the 2026 limit that is a meaningful amount every month.