Governer Phil Murphy, please help public sector and federal employees save for retirement by not taxing their retirement contributions!
New Jersey is one of a few states that taxes retirement contributions for federal and public servant employees. A 403(b) is the retirement program for non-profit employees such as teachers and hospital employees. A 403(b) is the equivalent of the better known 401(k) retirement program developed for those working in for profit organizations. The Thrift Savings Plan or TSP is the 401K equivalent for federal employees. Recognizing this equivalence, the federal tax law treats both 401(k), TSP, and 403(b) retirement program contributions as pre-tax contributions, which are deducted from gross income before taxes are computed. Many states including New York also exempt contributions to both forms of retirement programs from tax. However, New Jersey is one state that taxes TSP and 403(b) contributions while extending tax-exempt status to 401(k) contributions. Teachers, government employees and other non-profit employees in NJ have to pay taxes on their retirement contributions, while for-profit employees are not subjected to NJ tax on their contributions to their equivalent 401(k) programs. Recognizing this inequity, Senator Kip Bateman of the NJ senate had introduced a bill in 2008 that seeks parity in tax treatment between both 401(k) and 403(b) retirement programs. It is time to finally correct this unequal treatment of retirement savings plans!
