N.J. Admin. Code § 18:35-2.5

Current through Register Vol. 56, No. 21, November 4, 2024

Section 18:35-2.5 - Pensions and annuities

(a) An employee may defer the payment of tax on both employee and employer contributions to I.R.C. § 401(k) deferred compensation plans. Employee contributions to any other type of retirement plan including, but not limited to, plans under I.R.C. § 403(b), I.R.C. § 457, I.R.C. § 414(h), SEP, Federal Thrift Savings Funds, or Individual Retirement Accounts must be included in gross income. Employer contributions to these plans receive tax-deferred treatment.

(b) Both employee and employer contributions to SIMPLE IRAs, SEP, and SARSEP plans are included in taxable wages (neither receive tax-deferred treatment).

(c) Disability pensions: Pension amounts received as a result of a permanent and total disability are excludable from gross income.

1. "Permanent and total" disability means the inability to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment.

2. A "substantial gainful activity" means the performance of significant duties over a reasonable period of time while working for pay or profit, or in work generally done for pay or profit.

3. To be considered permanent and total, a physician must certify that the condition is either expected to result in death or has lasted (or can be expected to last) continuously for at least 12 months.

4. An individual who is receiving a disability pension and is gainfully employed or working for profit does not meet the criteria of a permanent and total disability and must include this disability pension income in the gross income category of pension and annuity income.

5. If an individual retires before age 65 on a total and permanent disability pension and continues to receive pension payments after reaching age 65, then the disability pension is treated as ordinary pension income beginning the year the individual reaches age 65.

N.J. Admin. Code § 18:35-2.5

Amended by 48 N.J.R. 295(a), effective 2/16/2016