The guidance that your employer will use to set up the program is in the IRS 15B
It's down the page under Transportation (Commuting) Benefits
And indeed, it says:
"Generally, you can exclude qualified transportation fringe benefits from an employee's wages even if you provide them in place of pay. However, qualified bicycle commuting reimbursements do not qualify for this exclusion. "
The pre-tax option for the parking, bus, and van pool benefits has generally been in place to allow for "not for profit" organizations to provide some degree of commuter benefits.
You can subsidize your employees bus pass and take it right off the top of your corporate taxable income AND your employee does not have to pay taxes on the subsidy. That, in a nutshell is how the Transportation Fringe Benefit Act is structured.
But what if you work for a non-profit (like the government, or a State University, or the American Red Cross), your employer does not pay taxes, so being able to "deduct" this subsidy from your taxable income does not help the organization it just costs them money. The IRS came up with a "alternative" (I don't see this "alternative in the original,10 year Fringe Benefit Act) for non-profits and made an administrative ruling to allow pre-tax deductions for Commuter expense vs direct subsidy by non profit employers. This way it does not cost the non profit money for no benefit and the employees still enjoy a small degree of tax incentive by being able to fund commuting expenses pre-tax with their own money.
Some "for profit" employers also offer these benefits as pre-tax vs direct subsidy as well, it's not against the rules. For example, my employer subsidizes bus passes with company money, but only offers parking benefits on a pre-tax deduction method, and does not offer van pools at all.
I imagine that the IRS looked at the numerous "service providers" for bicycle commuting services and made the decesion that offering the benefit as a pre-tax deduction was unworkable. With parking and bus benefits pre-tax payments, employers generally only have one or two service providers to deal with and most employers deduct the money pre-tax from your payroll and pay those few service providers directly vs giving you the money and you pay. This keeps them "safe" if ever audited for taxes. They can clearly show that the deduction they took was paid directly to ABS parking serivces or your local transit authority. With bicycle benefit, they don't have that same opportunity. Your bicycle expenses might go to almost anybody, a dozen different bike shops, Wal Mart, an on-line retailer, the city for a bike locker.....whatever. So, they don't have a clear way of demonstrating to the IRS that they sheltered $20.00 a month of your income from payroll taxes that went to bicycle commuting.
It's a narrow and risk adverse interpretation. A system for doing this is in place for day care expenses that also has 1000's of service providers, but they have likely decided that for this small a payment and a percieved small audience of potential recipents that it's "just not worth it".