Form Nj-2440 - Statement In Support Of Exclusion For Amounts Received Under Accident And Health Insurance Plan For Personal Injuries Or Sickness Page 2
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1
2Gross Income Tax
Employee Accident or Health Insurance Exclusion
N.J.A.C. 18:35-2.3
18:35-2.3
Employee accident or health insurance
2. Temporary disability benefit payments required to be made to
exclusion from taxable gross income
employees under a company’s private plan established pursuant
to New Jersey law in lieu of the State Plan described in (f)1 above
(a) Amounts received by an employee through an accident or
and which has been approved by the Bureau of Private Plan
health insurance plan for personal injuries or sickness are not subject
Disability Benefits, Division of Unemployment Insurance and
to tax under the New Jersey Gross Income Tax Act.
Disability Insurance; and
(b) Amounts received by an employee on account of personal
3. Payments made to employees for personal injuries or sickness
injury or sickness qualify for exclusion from taxable gross income when
under a health or accident insurance policy by a commercial
received under the provisions of an employee accident or health insur-
insurance company.
ance plan which satisfies the following requirements:
(g) All taxpayers will be required to file with their annual New
1. The payments must be compensation for wage loss which results
Jersey Gross Income Tax Return a claim form furnished by the direc-
from absence due to injury or sickness of the employee; and
tor for the exclusion of any amounts received by them as an employee
2. The payments must have a requisite certainty under an enforce-
through an accident or health insurance plan for personal injuries or
able contractual obligation under the plan (see N.J.A.C. 18:35-2.3
sickness which meet all the conditions for exclusion from taxable gross
(e)); and
income under (f) 1, 2 and 3 above.
3. The payments must not relate to sick leave wage continuation, the
EXAMPLES:
taking of which is largely discretionary and the payments are
made regardless of the reason for absence from work.
i. An employee of Company X is allowed 12 vacation days and 15
sick days for the year 1982. The employee uses 12 vacation days and
(c) The exclusion from taxable gross income applies to payments
10 sick days in 1982 for which he receives his regular wage payment,
to employees under a health or accident insurance plan regardless of
regardless of the cause for his absence. The amounts received by the
whether insurance coverage is with a commercial insurance company
employee in 1982 for the 12 vacation days and 10 sick days are sub-
to which premiums are paid by both employees and employer or sole-
ject to tax as wage and salary income to the employee and the employ-
ly by the employer; or whether insurance coverage is provided by an
er must also withhold gross income tax on such payments.
employer’s self-insured plan for which no insurance premiums are paid
by the employees.
ii. Company Y has a self-insured disability plan for its employees
who are absent from work because of accident or sickness. The plan
(d) The exclusion from taxable gross income applies to payments
is fully funded by the employer company and the employees make no
required to be made to employees under the State mandated tempo-
contribution to the plan. Payment for the full amount of wages is made
rary disability benefit plan pursuant to the New Jersey Temporary
to disabled employees absent from work, on the eighth calendar day.
Disability Law (N.J.S.A. 43:21-25, et seq.).
Payments which are
Payment for the initial seven days to the covered employee is discre-
excludable from taxable gross income include temporary disability ben-
tionary with the company employer under the plan.
The amount
efit payments required to be made under the State Plan which is
received by the absent employee because of his disability is exclud-
administered by the Bureau of State Plan Disability Benefits under the
able from taxable gross income as health or accident insurance after
New Jersey Disability Law. Exclusion from taxable gross income also
the initial seven days of absence but is subject to withholding tax. Any
includes payments required to be made to employees under a compa-
amount received by the employee as payment for the seven initial days
ny’s private plan established pursuant to New Jersey law in lieu of the
is subject to tax as wage and salary income to the employee and is
State Plan described in the preceding sentence and which has been
also subject to withholding tax.
approved by the Bureau of Private Plan Disability Benefits, Division of
Unemployment Insurance and Disability Insurance.
iii. Employee C receives a payment in 1982 from the New Jersey
Disability Benefit Fund during an absence from work because of tem-
(e) Where payment to employees under the health or accident
porary disability resulting from illness. Both the employee and employ-
insurance plan is largely discretionary with the employer, such as dur-
er have contributed to the disability benefit fund. The total amount
ing the initial period (for example, first seven days), the exclusion from
received by the employee from the New Jersey Disability Benefit Fund
taxable gross income does not apply. Such payments to the employ-
is excludable from taxable gross income as a payment for health or
ee are subject to tax as wages and salaries. In order for a wage loss
accident insurance and is not subject to withholding tax.
payment made under an accident or health insurance plan to be
excludable from taxable gross income, the payment to the employee
iv. Employee D is absent from work in 1982 because of illness and
must have a requisite certainty under an enforceable contractual oblig-
receives from the X Insurance Company the full amount of his wages
ation.
during the period of his absence from work. The payment was made
from a health or accident insurance policy to which only the employer
(f) Effective June 1, 1982, withholding of the gross income tax
has contributed. The amounts received by the employee are exclud-
shall be required on all payments of wages and salaries made to an
able from taxable gross income as health or accident insurance and
employee by an employer. The withholding or the tax is required even
are not subject to withholding tax.
though such payments meet all the conditions for exclusion from tax-
able gross income as made through an accident or health insurance
plan for personal injuries or sickness under this section. The only
exceptions for the withholding of tax shall be for the following:
1. Temporary disability benefit payments required to be made under
the State Plan which is administered by the Bureau of State Plan
Disability Benefits under the New Jersey Disability Law;
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