Bill Text: NJ S2911 | 2018-2019 | Regular Session | Introduced
Bill Title: Excludes certain cafeteria plan benefits from gross income tax.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Introduced - Dead) 2018-09-13 - Introduced in the Senate, Referred to Senate Budget and Appropriations Committee [S2911 Detail]
Download: New_Jersey-2018-S2911-Introduced.html
Sponsored by:
Senator THOMAS H. KEAN, JR.
District 21 (Morris, Somerset and Union)
SYNOPSIS
Excludes certain cafeteria plan benefits from gross income tax.
CURRENT VERSION OF TEXT
As introduced.
An Act providing gross income tax exclusion for certain cafeteria plan benefits, amending various parts of the statutory law.
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. Section 44 of P.L.2007, c.62 (C.18A:16-19.1) is amended to read as follows:
44. Notwithstanding the provisions of any other law to the contrary, a board of education, or an agency or instrumentality thereof, may establish as an employer a cafeteria plan for its employees pursuant to section 125 of the federal Internal Revenue Code, 26 U.S.C. s.125, and shall establish such a plan for medical or dental expenses not covered by a health benefits plan. The plan shall provide for a reduction in an employee's salary, through payroll deductions or otherwise, in exchange for payment by the employer of medical or dental expenses not covered by a health benefits plan, and may provide for a reduction in an employee's salary, through payroll deductions or otherwise, in exchange for payment by the employer of dependent care expenses as provided in section 129 of the code, 26 U.S.C. s.129, and such other benefits as are consistent with section 125 which are included under the plan. The amount of any reduction in an employee's salary for the purpose of contributing to the plan shall continue to be treated as regular compensation for all other purposes, including the calculation of pension contributions and the amount of any retirement allowance, but, to the extent permitted by State law or the federal Internal Revenue Code, shall not be included in the computation of State or federal taxes withheld from the employee's salary.
(cf: P.L.2011, c.78, s.51)
2. Section 45 of P.L.2007, c.62 (C.40A:10-23.5) is amended to read as follows:
45. Notwithstanding the provisions of any other law to the contrary, a local unit of government, or an agency, board, commission, authority or instrumentality thereof, may establish as an employer a cafeteria plan for its employees pursuant to section 125 of the federal Internal Revenue Code, 26 U.S.C. s.125, and shall establish such a plan for medical or dental expenses not covered by a health benefits plan. The plan shall provide for a reduction in an employee's salary, through payroll deductions or otherwise, in exchange for payment by the employer of medical or dental expenses not covered by a health benefits plan, and may provide for a reduction in an employee's salary, through payroll deductions or otherwise, in exchange for payment by the employer of dependent care expenses as provided in section 129 of the code, 26 U.S.C. s.129, and such other benefits as are consistent with section 125 which are included under the plan. The amount of any reduction in an employee's salary for the purpose of contributing to the plan shall continue to be treated as regular compensation for all other purposes, including the calculation of pension contributions and the amount of any retirement allowance, but, to the extent permitted by State law or the federal Internal Revenue Code, shall not be included in the computation of State or federal taxes withheld from the employee's salary.
(cf: P.L.2011, c78, s.52)
3. Section 7 of P.L.1996 c.8 (C.52:14-15.1a) is amended to read as follows:
7. Notwithstanding the provisions of any other law to the contrary, the State Treasurer on behalf of the State, and the governing body of an independent State authority, board, commission, corporation, agency or organization may establish as an employer a cafeteria plan for its employees pursuant to section 125 of the federal Internal Revenue Code, 26 U.S.C. s.125, and shall establish such a plan for medical or dental expenses not covered by a health benefits plan. The plan shall provide for a reduction in an employee's salary, through payroll deductions or otherwise, in exchange for payment by the employer of medical or dental expenses not covered by a health benefits plan, and may provide for a reduction in an employee's salary, through payroll deductions or otherwise, in exchange for payment by the employer of dependent care expenses as provided in section 129 of the code, 26 U.S.C. s.129, and such other benefits as are consistent with section 125 which are included under the plan. The amount of any reduction in an employee's salary for the purpose of contributing to the plan shall continue to be treated as regular compensation for all other purposes, including the calculation of pension contributions and the amount of any retirement allowance, but, to the extent permitted by State law or the federal Internal Revenue Code, shall not be included in the computation of State or federal taxes withheld from the employee's salary.
(cf. P.L.2011, c.78, s.53)
4. Section 1 of P.L.1995, c.111 (C.54A:6-24) is amended to read as follows:
1. Gross income shall not include [the value of an employee's] amounts paid by an employer on behalf of and at the election of an employee for a qualified [option under] benefit of a cafeteria plan which meets the requirements of section 125 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.125, if the [employee does not elect to receive cash and the value of the option] amount so paid is excludable from federal taxable income.
[As used in this section:
"Cafeteria plan" means an employee benefit plan that meets the requirements of section 125 of the federal Internal Revenue Code of 1986, 26 U.S.C. s.125;
"Qualified option" means an option to receive cash in lieu of a qualified employer-provided benefit which option may only be exercised if the employee derives a substantially similar benefit from a source other than the employer;
"Qualified employer-provided benefit" means a benefit the value of which is excludable from federal taxable income under a cafeteria plan but which is not a benefit provided pursuant to a salary reduction agreement; and
"Salary reduction agreement" means an agreement between an employer and an employee under which the employee individually chooses to reduce the employee's compensation, or to forgo increases in compensation, and to have the amount provided, as an employer-provided benefit, by the employer to the employee; including but not limited to the agreements commonly known as flexible spending accounts and premium conversion options].
(cf: P.L.1995, c.111, s.1)
5. This act shall take effect immediately and apply to tax years following the year of enactment.
STATEMENT
This bill provides an income tax exclusion for certain cafeteria plan benefits. Cafeteria plans, authorized pursuant to 26 U.S.C. §125, are plans where employees can choose among employer provided benefits, such as flexible spending accounts (FSAs), that are excludable from federal tax.
Under current State law only a narrow subset of cafeteria plan benefits are excludable from the State income tax. This bill expands the State income tax exclusion to match the federal income tax exclusion.
