Bill Text: NJ A4614 | 2018-2019 | Regular Session | Introduced
Bill Title: Excludes deferred compensation of certain public school and federal tax-exempt organization employees from gross income tax; requires employers to keep records of contributions.
Spectrum: Partisan Bill (Democrat 2-0)
Status: (Introduced - Dead) 2018-10-18 - Introduced, Referred to Assembly Education Committee [A4614 Detail]
Download: New_Jersey-2018-A4614-Introduced.html
Sponsored by:
Assemblywoman JOANN DOWNEY
District 11 (Monmouth)
SYNOPSIS
Excludes deferred compensation of certain public school and federal tax-exempt organization employees from gross income tax; requires employers to keep records of contributions.
CURRENT VERSION OF TEXT
As introduced.
An Act excluding deferred compensation of certain public school and federal tax-exempt organization employees from the gross income tax, and amending P.L.1983, c.571.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Section 2 of P.L.1983, c.571 (C.54A:6-21) is amended to read as follows:
2. a. Gross income shall not include amounts contributed by an employer on behalf of and at the election of an employee:
(1) to a trust which is part of a qualified cash or deferred arrangement which meets the requirements of [Section 401(k)] subsection (k) of section 401 of the [1954] federal Internal Revenue Code (26 U.S.C. s.401), as amended; and
(2) for annuity contracts, or treated as amounts contributed for annuity contracts, under the provisions of subsection (b) of section 403 of the federal Internal Revenue Code (26 U.S.C. s.403).
b. An employer making contributions under subsection a. of this section shall maintain a record of every contribution made on behalf of an employee. The record shall be confidential and shall not be published or open to public inspection, but the record shall be open to inspection by, and made available to, the employee to which the record pertains.
(cf: P.L.1983, c.571, s.2)
2. This act shall take effect immediately and apply to taxable years beginning on or after the January 1 next following enactment.
STATEMENT
This bill excludes from gross income taxation the payments that employers make on behalf of employees of federally tax-exempt charitable organizations and employees of public school systems toward retirement savings, as authorized under subsection (b) of section 403 of the federal Internal Revenue Code of 1986.
The federal Internal Revenue Code allows employees of these tax exempt organizations to make "salary reduction agreements" with their employers, plans under which the employees may individually choose to receive less current salary (subject to limits) and instead purchase annuity contracts or invest in mutual funds for their retirement. These retirement savings are not subject to federal taxation until amounts are later distributed.
The New Jersey gross income tax currently allows the employees of private, for-profit, businesses to make such tax-deferred contributions to the retirement savings plans authorized under section 401(k) of the federal Internal Revenue Code but does not allow tax-deferred contributions to the retirement savings plans authorized under section 403(b) of the Internal Revenue Code. This bill gives the employees of federally tax-exempt charitable organizations and employees of public school systems the same tax incentives for retirement savings that are provided to the employees of for-profit businesses.
Additionally, the bill requires an employer making contributions to a 401(k) or 403(b) plan on behalf on an employee to maintain a record of every contribution made on behalf of the employee. The record will be confidential, but the record will be open to inspection by, and made available to, the employee to which the record pertains.
