NJ and PA Treatment of Flex Contributions

[Christine Roberts]

I have been told that New Jersey and Pennsylvania subject employee salary deferrals to a flex/cafeteria plan, to state and local taxes.

My cursory research indicates that this is not entirely accurate - any comments from practitioners in those states would be welcome.

[GBurns]

What did you find to be not entirely accurate?

[IRC401]

Salary reductions used for medical expenses are not subject to the PA income tax, but salary reductions used for dependent care are subject to the PA income tax. Prior to Jan. 1, 1997 the PA Dept. of Revenue took the position that all salary reductions were subject to the PA income tax.