Do all states recognize 401(k) contributions?

[Sully]

Greetings,

Are there any states that do not allow deductions for employee 401(k) contributions? If so, is there a list out there somewhere? I have searched and searched but cannot find anything.

Thank you.

[david rigby]

Don't know if it's current, but PA did not.

[masteff]

I can't add anything useful other than the phrase state tax conformity. State tax conformity was a big issue right after EGTRRA. The American Benefits Council had a useful listing of non-conforming states. Unfortunately I don't quickly find anything on their site that looks at it more broadly than just the prior EGTRRA issues.

[Bird]

PA definitely does not give a deduction. I don't know about others.

[Peter Gulia]

Sully, is your client a participant or an employer?

If your client is a participant who cares about how State income taxes apply to him or her, you might limit your research to the State or States in which the participant resides (or is domiciled), the State or States in which the participant works (if different), and those other States that have taxing power over the participant (if any).

If your client is an employer, often a practical solution is to make sure that its contract with its payroll servicer includes sufficient warranties and indemnities so that the servicer pays the employer's losses that result from the servicer's failure to know or apply a tax law.

Also, a service contract with a retirement plan's recordkeeper might obligate the recordkeeper to know and apply all tax laws on tax-reporting, and withholding taxes from, plan distributions - and to indemnify the plan's fiduciaries against the recordkeeper's failures. (To meet these obligations, many recordkeepers engage lawyers for research updates on changing tax laws.)

[Sully]

Sully, is your client a participant or an employer?

Employer.

It was really a question for their payroll company but I thought it would be the type of information that would be readily available either through my reference material or an internet search. No such luck.