Changes in the Administration
of the New Jersey State Employees Deferred Compensation Plan
On October 25, 2005, the State Treasury
and New Jersey State Employers Deferred Compensation Board announced
that Prudential Retirement, a business of New Jersey-based Prudential
Fianancial, has been selected as the third party administrator
for the New Jersey State Employees Deferred Compensation Plan
(NJSEDCP). Because of this upcoming change in the administration
of the NJSEDCP, effective January 1, 2006, some of the information
provided below may no longer be accurate. The Division of Pensions
will provide procedural updates regarding the NJSEDCP as soon
as they become available.
Emergency
Withdrawal
Guidelines
If an employer/employee relationship
exists, a Plan participant may request an amount needed to meet
an emergency, up to the balance of his/her Deferred Compensation
account.
The Deferred Compensation Plan is
subject to the rules and regulations of the Internal Revenue Service
Code 457. The guidelines set by IRS Code 457 are very specific
concerning what constitutes an "unforeseeable emergency".
The code states:
"A severe financial hardship
to the participant, resulting from a sudden and unexpected illness
or accident of the participant or of a dependent of the participant,
loss of the participant's property due to casualty, or other
similar extraordinary and unforeseeable circumstances arising
as a result of events beyond the control of the participant."
In order to qualify for an emergency
withdrawal, the financial hardship must be one that cannot be
relieved by:
- reimbursement or compensation
by insurance or otherwise,
- liquidation of the participant's
assets to the extent that liquidation of such assets would itself
cause severe financial hardship, or
- cessation of deferrals under the
Plan.
Upon request to the Deferred Compensation
Office, an Application for Emergency Withdrawal will be
provided to Plan participants. The application must be returned,
along with supporting documentation, to the Deferred Compensation
office. Participants may be contacted to provide additional documentation
if necessary. Within ten working days of receiving the completed
application and all supporting documentation, the Administrator
shall determine whether the participant qualifies for withdrawal
under the interpretation of the IRS Code.
If the Administrator denies the request
for an emergency withdrawal, the participant may appeal the decision
by writing to the Deferred Compensation Board.
All verbal requests for emergency
withdrawal through the employee's payroll center should be directed
to the Deferred Compensation Plan Office for attention (609)
292-3605). The Deferred Compensation Office will review the
guidelines with the participant and determine if the participant
has cause to file a request for emergency withdrawal and an accompanying
Financial Profile form.
Federal
Tax Implications
Contributions into the New Jersey
State Employees Deferred Compensation Plan are exempt from federal
income tax withholding. All distributions from the Deferred Compensation
Plan are deemed to be supplemental wages and, as such, according
to Revenue Ruling 82-46, are subject to federal income tax withholding.
The Deferred Compensation Plan currently withholds federal income
tax based upon information provided to the Plan on Form W-4, Employee’s
Withholding Allowance Certificate.
Those receiving distributions from
Deferred Compensation will be issued a W-2 for the applicable
tax year. Distributions are considered wages for the tax year
in which they are received and will be taxed accordingly.
State
Tax Implications
The New Jersey State Employees Deferred
Compensation Plan will issue, in the appropriate tax year, a W-2
that includes the State taxability of Deferred Compensation distributions.
All contributions into the Deferred Compensation Plan have been
subject to State taxes. Only the gain portion of the distribution
will be included as income for State tax purposes.