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Division of Taxation

Gross Income Tax Treatment of Employer Post-Retirement Contributions to a Section 403(b) Plan

Employers can make post retirement contributions to a §403(b) plan up to five years following an employee’s separation from service. Federally, these contributions are not taxable to the employee when made to the plan but are taxable when they are withdrawn.

The New Jersey Gross Income Tax Act does not have a provision deferring the tax on contributions made by an employer or employee to a §403(b) plan. These contributions are taxable in the year they are made and are subject to withholding like any other wage or remuneration paid an employee. Employers making post separation contributions to a former employee’s §403(b) account must issue the employee a W-2 indicating the amount contributed in the State Wage box and withhold New Jersey Gross Income Tax if the amounts contributed require withholdings.

The employee must report these contributions in the year(s) they are made. Any distributions the employee receives from the §403(b) should be adjusted/reduced for the contributions already reported and taxed for Gross Income Tax purposes.


Last Updated: Monday, 03/02/20