Bill Text: NJ S3499 | 2020-2021 | Regular Session | Introduced
Bill Title: Requires same limitation on public employee contributions to flexible spending accounts as provided by federal law adjusted for inflation.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2021-03-09 - Introduced in the Senate, Referred to Senate State Government, Wagering, Tourism & Historic Preservation Committee [S3499 Detail]
Download: New_Jersey-2020-S3499-Introduced.html
Sponsored by:
Senator JOSEPH P. CRYAN
District 20 (Union)
SYNOPSIS
Requires same limitation on public employee contributions to flexible spending accounts as provided by federal law adjusted for inflation.
CURRENT VERSION OF TEXT
As introduced.
An Act concerning public employee contributions to flexible spending accounts and amending various parts of the statutory law
Be It Enacted by the Senate and General Assembly of the State of New Jersey:
1. 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 limitation on the amount of any reduction in an employee's salary for the purpose of contributing to a flexible spending account as provided for by the plan shall be the limitation as adjusted for inflation annually provided in section 125 of the code, 26 U.S.C. s.125(i). 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 the federal Internal Revenue Code, shall not be included in the computation of federal taxes withheld from the employee's salary.
(cf: P.L.2011, c.78, s.53).
2. 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 limitation on the amount of any reduction in an employee's salary for the purpose of contributing to a flexible spending account as provided for by the plan shall be the limitation as adjusted for inflation annually provided in section 125 of the code, 26 U.S.C. s.125(i). 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 the federal Internal Revenue Code, shall not be included in the computation of federal taxes withheld from the employee's salary.
(cf: P.L.2011, c.78, s.51.
3. 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 limitation on the amount of any reduction in an employee's salary for the purpose of contributing to a flexible spending account as provided for by the plan shall be the limitation as adjusted for inflation annually provided in section 125 of the code, 26 U.S.C. s.125(i). 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 the federal Internal Revenue Code, shall not be included in the computation of federal taxes withheld from the employee's salary.
(cf: P.L.2011, c.78, s.52)
4. This act shall take effect immediately.
STATEMENT
This bill requires that the limitation on the amount of any reduction in a public employee's salary for the purpose of contributing to a flexible spending account (FSA) must be the limitation as adjusted for inflation annually, provided in federal law. This bill applies to employees and employers of the State, local governments, and school districts.
FSAs are benefit plans established by employers to reimburse employees for health care expenses such as deductibles, copayments, and unreimbursed medical expenses that would be deductible under the Internal Revenue Code, but not for health insurance or long-term care insurance premiums. FSAs are usually funded by employees through "salary reduction agreements," although employers are permitted to contribute as well. The contributions to and withdrawals from FSAs are tax-exempt.
Prior to 2010, the Internal Revenue Code imposed no dollar limit on FSA contributions, but employers could. In 2010, the Affordable Care Act limited the annual FSA contribution to $2,500 commencing in 2013. Section 125 of the federal Internal Revenue Code, 26 U.S.C. s.125(i), was later amended in 2013 to provide an adjustment for inflation beginning in any taxable income year after December 31, 2013. For the taxable year beginning in 2021, the dollar limitation under section 125(i) on voluntary employee salary reductions for contributions to FSAs is $2,750. If this bill becomes law, then the limitation on a public employee's FSA contributions for 2021 would be increased from $2,500 to $2,750. This limitation would be adjusted annually.
