Employee Benefit – New Jersey Updates – Mandates, Reporting & Transit
Individual Mandate in NJ:
- It is identical to the federal requirement—and NJ created it to make a state-based penalty for NJ Taxpayers that don’t have coverage. Just like taxpayers in Massachusetts, NJ taxpayers will have to have health coverage or pay the applicable tax (fine).
- Should the federal government and/or the current administration succeed with repealing the Affordable Care Act, the NJ and MA state-level-individual mandates would still be in place.
- Details about the Shared-Responsibility Payments can be found here.
Employer Mandate in NJ:
- For 2019, Employers must also send their federal 1094’s/1094’s to New Jersey by February 15, 2020.
Transportation in NJ:
- Employers with 20 or more NJ employees need to offer employees the ability to defer pre-tax monies under a Section 132 plan. Fines begin in 2020 and will be $250/qtr.
For more details on the last update, please continue reading.
Federal Background: Qualified transportation fringe benefits under Section 132(f) of the Internal Revenue Code (IRC) allow an employer to provide commuter and transit benefits to their employees that are tax-free up to a certain limit. This employer-provided voluntary benefits program allows employees to effectively reduce their monthly commuting or transit costs. In 2019, the monthly limit is $265 for any commuter benefit or transit pass. While such benefits provide a tax benefits to employees, under the 2017 Tax Cuts and Jobs Act, employers are no longer allowed a federal income tax deduction for qualified transportation fringe benefits. The Act also requires tax-exempt employers to pay unrelated business income taxes on such benefits.
Garden State Action: On Friday, March 1, 2019, New Jersey Governor Phil Murphy signed S1567 into law, requiring certain employers to offer a pre-tax transportation fringe benefit to their employees. New Jersey employers with at least 20 employees will be required to offer this benefit to employees who are not currently in a collective bargaining agreement.
It appears that “covered employers” means employers with at least 20 employees, regardless of whether they all work in the State of New Jersey; however, clarification from the regulators on this would be helpful.
“Many residents of New Jersey use mass transit or other forms of transportation to commute daily to and from work,” said Governor Murphy. “Providing this pre-tax benefit to commuters throughout our state will reduce the financial burden of fares and parking costs, resulting in significant savings. By signing this bill, my Administration is taking another step toward creating the fairer and more customer-friendly transportation system that our commuters deserve.”
An employee under the new law is identified as anyone hired or employed by the employer and who reports to the employer’s work location, and mirrors the definition used in the unemployment compensation law. Certain temporary or limited exceptions exist for employees covered by a collective bargaining agreement and those employed by the federal government.
Some of the details regarding implementation of the program are still outstanding and the Commission of Labor and Workforce Development will adopt rules and regulations concerning the administration and enforcement of the benefit.
A pre-tax benefit will allow an employee to set aside a certain portion of pre-taxed wages, which could be made available for specified transportation services while reducing the employee’s federal taxable income.
The New Jersey Department of Labor and Workforce will adopt rules and regulations concerning the administration and enforcement of the pre-tax benefit. Civil penalties will apply for non-compliance with this new law. For the first violation, the penalty is not less than $100 and not more than $250. An employer has 90 days from the date of the violation to offer the pre-tax transportation fringe benefit program before the civil penalty is imposed. After 90 days, each additional 30 day period in which an employer fails to offer a pre-tax transportation fringe benefit is a subsequent violation subject to a $250 civil penalty. The civil penalty is to be imposed only once in any 30 day period. The Commissioner of Labor and Workforce Development is required to ensure that eligible employers provide the pre-tax transportation fringe benefit and is authorized to issue citations for noncompliance.
When does this take effect?
While the ordinance takes effect immediately, it will not be enforced until final rules and regulations are released. The earliest enforcement is anticipated to be March 1, 2020, but is subject to change. Employers should determine whether their current employee demographic would require these benefits to be offered to their employees. Employers currently offering transportation fringe benefits to employees should review their current program to ensure compliance with the final rules and regulations in New Jersey once those are released.