SENATE, No. 526

STATE OF NEW JERSEY

INTRODUCED JANUARY 29, 1996

By Senator BASSANO

An Act excluding certain employee retirement fund contributions from gross income under the gross income tax, 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. Contributions to certain employee trusts. Gross income shall not include amounts contributed by an employer on behalf of and at the election of an employee 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 of 1986, 26 U.S.C.§401, as amended, or contributions to the federal Thrift Savings Fund which meet the requirements of subsection (j) of section 7701 of the federal Internal Revenue Code of 1986, 26 U.S.C.§7701.

(cf: P.L.1983, c.571, s.2)

    2. This act shall take effect immediately and apply to taxable years beginning on or after enactment.

STATEMENT

    This bill excludes the payments that federal employees make into their thrift savings plan fund from gross income subject to taxation under the New Jersey gross income tax.

    Private sector employees are permitted by section 401 of the federal Internal Revenue Code to make arrangements with their employers to divert part of their salaries to retirement funds. These "cash or deferred arrangement" contributions have been exempt from taxation under the New Jersey gross income tax since 1984. In 1986 Congress established the Federal Employees Retirement System which allowed federal employees to make federally tax deductible contributions to their own retirement funds under a system very similar to (but not identical with) that allowed under section 401 of the federal Internal Revenue Code. The federal employee contributions are not exempt from the gross income taxation. This bill would provide parity of treatment for federal employees.

Excludes certain federal employee retirement fund contributions from gross income under the gross income tax.