NJ lawmakers want to expand tax exemptions for retirement plans
State lawmakers are looking to expand the types of tax-exempt contributions New Jerseyans can make to retirement plans in hopes of enticing more people to put away money for their nest eggs.
Currently, only 401(k) financial contributions are tax-exempt under state law. But a pair of bills moving through the state Legislature would expand the state income tax exclusion to include 401(a) pensions, 403(b) retirement plans, federal Thrift Savings Funds, 408 IRAs and 457 deferred-compensation plans.
The state Assembly's version, A512, was approved in a bipartisan vote Monday by the Assembly Financial Institutions and Insurance Committee after a companion bill passed the state Senate last year.
“This bill would align our state with how the feds and other states handle worker retirement contributions,” said one of the sponsors, Assemblyman Ned Thomson, R-Ocean. “Workers won’t have to choose between paying for the bills today or saving for their futures.”
Expanding tax exemptions would save taxpayers $205 million in the first year the legislation takes effect, Thomson said in a statement.
“This legislation will level the playing field on investment options by expanding the types of federally recognized retirement savings plans that employees would be able to contribute to on a tax-exempt basis,” said state Sen. Vin Gopal, D-Monmouth, a sponsor of the Senate version.
The legislation still must win approval from the full Assembly and then get Gov. Phil Murphy's signature to become law. Murphy's office declined to comment on Tuesday.
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The U.S Census Bureau reported in 2020 that 18.2% of working-age Americans had an IRA or Keogh retirement account; 34.6% had a 401(k), 403(b), 503(b) or Thrift Savings Plan; and 13.5% had a defined-benefit pension. But only 36% of U.S adults felt that their retirement savings were on track, said a May 2021 report by the Federal Reserve.
The New Jersey Business and Industry Association, a trade group for employers, has praised the bill, saying it would boost “affordability” around the state.
Daniel Munoz covers business, consumer affairs, labor and the economy for NorthJersey.com and The Record.
Email: munozd@northjersey.com; Twitter: @danielmunoz100
This article originally appeared on NorthJersey.com: NJ legislation would expand tax breaks for retirement savings plans
