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Employer sponsored health plans in New Jersey

Hello. Please provide some guidance on insurance plans that are completely sponsored by the employer in NJ.
Are they taxable or not?
Thank you!


  • I can give you most of an answer.

    • For federal only you really have to work at to get taxable health insurance (ignoring ACA related taxes). You have to have a plan that is both self-insured and the payment going to a HCE (highly compensated employee)) or a payment for something IRS considers not qualified (boob job for cosmetic reasons) to make the employer paid payment taxable.
    • NJ is not my state but to my knowledge all 50 states followed the basic IRC 103 and 104 rules on health insurance taxability, at least prior to ACA. These days, who knows?
  • ACA (ObamaCare) had an excise tax on so called Luxury Plans. I have no idea what the exact status of ACA (which Trump is trying to kill by death of a 100 executive orders without actually repealing the law) and the 50 state equivalents currently are. I will likely be dead of old age before the courts are done with this mess.

  • Taxable to who and taxes for what entity? That's a loaded question...

    do you mean that the employer is paying 100% of the premiums? If the employee is paying part, you would at least need a "Premium Only Plan" under Section 125 for the employee portion to be nontaxable to them.

    But I agree with David. It is very rare for an employer-sponsored health plan to be taxable to either the employer or employee on a federal level. And for me also, your state is not mine so I have no clue as to state or local taxation.

    I suggest availing yourself to the services of an insurance broker (not a carrier) who could help out a bit locally. Generally this would be an HR task/duty rather than a payroll duty unless you are asking about deductions from an employee's paycheck.

  • Yes, the employer is paying 100% of the premiums.
    New Jersey does not follow the Federal guidelines for taxability of insurance. Deductions are not pre-tax for NJ.
    My question is- are both the employee and employer taxed on the benefit?

  • Apples and oranges. Deductions are (generally) Section 125, are indeed not-pre-tax in NJ, and are NOT your original question that everybody answered. Notice how you left the word "deduction" completely out of your original question.

    If the employer pays for the insurance, that with a very few exceptions is non-taxable. That is IRC 103-104. It the employer chooses (not required) to get a Section 125 plan, the premiums are are generally pre-tax in all states but NJ. Two very different issues.

    No offense but we answer the questions people actually ask, not the questions they should have asked.

  • In the end you are asking state specific tax questions....for that you need more than an anonymous payroll forum. But in the end it would surprise me if the deductions (? what deductions if the employer is paying 100%?) were taxable to BOTH the employee AND the employer.

    You really ought to be seeking out a tax professional in your state then rather than this being a vague payroll question. It sounds like you are not even sure what you are trying to ask because do you mean paycheck deductions or business tax deductions?

  • IF we are talking NJ only and a valid Section 125 plan, then for NJ purposes only the deduction is not pre-tax. For federal purposes it is. I would not use the word "taxable" to describe the non-lack of normal taxability. Under several IRC codes (3401, 3402, others), ALL compensation is taxable unless explicitly excepted. NJ deductions are not "taxable", rather they are not "non-taxable" (assuming an IRC 125 plan, not something that is automatic). All deductions are inherently not "non-taxable" until/unless someone establishes an explicit benefit plan which changes this.

    I am not a NJ expert but my understanding is that not all deductions under a Section 125 plan are necessarily not pre-tax. I used to have a nice 50 state chart and the NJ system was a lot longer then yes/no for Section 125.

    Not the question, but PA does not follow the federal 401(k) rules.

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