Work-Related Fringe Benefits Most employees think of health insurance and retirement plans as their fringe benefits. However, there are several types of fringe benefits collectively known as work-related fringe benefits (or Section 132 fringe benefits) that are also available to many workers. The value of an employer-provided work-related fringe benefit is generally excluded from an employee’s income, subject to specific limitations and restrictions. Work-related fringe benefits include:

Qualified employee discount programs: A price reduction (discount) on an employer’s product or service generally offered to outside customers in the ordinary course of business in which the employee performs substantial services can generally be excluded from the employee’s income. The discount cannot exceed the employer’s profit margin on property or 20% of the employer’s selling price on services.

No-additional-cost services: The cost of a service provided by an employer for employees can generally be excluded from the employee’s income if (a) that service is normally offered to outside customers in the ordinary course of the business line in which the employee performs services and (b) the employer incurs no substantial additional cost to provide that service to the employee. However, only excess capacity services such as hotels; transportation by aircraft, train, bus, subway, or cruise line; or telephone services are eligible for this exclusion.

Working condition fringe benefits: These benefits include property or a service provided to an employee where the employee could have deducted the cost as a trade or business expense. Examples include magazine subscriptions, professional dues, and business travel and entertainment. De minimis fringe benefits: De minimis fringe benefits include goods or services that have a small (nominal) value where accounting for the item is unreasonable or administratively impractical. Generally, providing employees with cash or gift certificates does not qualify as a de minimis fringe benefit.

On-premises athletic facility: Eligible employees can use an on-premises tennis court, gym, or swimming pool provided by an employer on a tax-free basis.

Other benefits: Subject to limitations, the cost of qualified commuter transportation, transit passes, parking, moving expense reimbursements and retirement planning services (provided to an employee or spouse by an employer maintaining a qualified employer plan) are excludible from the employee’s income.