What is the IRS Readily Available Rule?
Cash reimbursement for a transit pass is not allowed if:
A voucher provider, which includes a mass transit authority, does not impose significant administrative costs.
Significant administrative cost is defined as an external cost imposed by the voucher provider (above and beyond the value of the voucher) the employer expects to incur when purchasing the vouchers. In general, a significant cost is defined as exceeding 1% of the average annual value of the vouchers, excluding a reasonable and customary delivery charge of $15 or less.
The voucher provider does not impose other, non-financial restrictions that effectively prevent the vouchers from being readily available.
Assuming the voucher provider does not impose significant administrative costs, a voucher is readily available provided that the voucher provider does not impose one of the following non-financial restrictions.
- Unreasonable advance purchase requirements: Advance purchase requirements imposed by the voucher provider will be unreasonable and cause a voucher to not be readily available if: (i) the voucher cannot be purchased at "regular intervals" (e.g. monthly intervals); or (ii) the voucher provider fails to provide the vouchers within a reasonable period of time after receiving payment for the voucher.
- Unreasonable quantity requirements: A voucher provider imposes unreasonable purchase quantity requirements if the voucher provider does not offer quantities of vouchers that are reasonably appropriate to the number of the employer's employees who use mass transit systems.
- Inappropriate limitations on voucher denominations available for purchase.