What is a Fixed and Variable Rate Mileage Program (FAVR)?

• There must be at least 5 enrolled drivers in the program
• All enrolled drivers must drive at least 5000 business miles per year
  
• Drivers must possess valid driver’s license and maintain vehicle insurance in compliance with the company's requirements

Everlance will work with you to develop and implement an IRS-compliant FAVR program that achieves your organization’s budgetary objectives. Please contact the Everlance Sales team to see if a FAVR program is right for your organization.

A Cent-per-Mile (CPM) is self-explanatory: drivers get a specific amount per business mile driven (most companies use the IRS Standard Rate for the current year). A CPM program reimburses all employees on the program at the same rate regardless of vehicle type and where they operate it to perform business tasks.

A FAVR program is a sophisticated mileage reimbursement program. Everlance’s FAVR car allowance program factors in each employee’s local fixed costs of vehicle ownership (depreciation, taxes, insurance, license & registration, etc.) and variable costs of vehicle operation (oil & gas, maintenance, tire wear, etc.) to create a customized variable mileage reimbursement rate that is specific to each driver, based on the employee’s location.

There are two instances of FAVR compliance:

• Driver compliance, which involves drivers uploading and maintaining valid 1) Drivers License, and 2) Auto-Insurance Policy (preferably a Declaration Page).
• Vehicle compliance, which involves these vehicle requirements: 1) Vehicle Age (e.g. 2019 or newer model), and 2) Vehicle MSRP (e.g. $25,500).

Being non-compliant with vehicle requirements makes driver reimbursements subject to taxability (Safe Harbor test), and being non-compliant with their driver requirements can get their reimbursements withheld and, if non-compliant for long periods, drivers can be removed from the FAVR program.

If a driver is non-compliant with his documents (auto-insurance and/or driver's license) it's up to the company's discretion to withhold their payment until new documents are approved.

Yes, they can enroll, but until they meet company requirements, a "Safe-Harbor" test will be applied to their allowances.

No. A FAVR payment is determined on the program's base vehicle, which is set up during implementation with the account admins. A new vehicle will only affect whether the driver complies with the vehicle guidelines of age and MSRP.

FAVR allowances (by IRS rules) are based on a single vehicle. Drivers may own several vehicles, but can only enroll one for their reimbursement program. Usually, that vehicle should be the newest one, even if it isn't the one they drive most often for business. 

Let's say an employee originally enrolled a 2016 Honda Civic initially but then wishes to enroll a 2024 Toyota Camry instead, they'd submit a new insurance declaration page that lists that vehicle, fill in the VIN, and our reviewers will update their information. 

Compliance is pulled on the 4th of each month for all accounts. Drivers should submit documents or updates by the 3rd so they get reviewed on time.

Fixed rates change when the driver is assigned to a different program, or their mileage band changes. For example, if they were expected to drive 10,000 - 15,000 miles in the year and end up driving 6,000, their mileage band will be adjusted, affecting their fixed portion (in that case it'll be lowered. If mileage exceeds the mileage band, it'll increase).