This bill amends existing New Jersey law to align the limitations on public employee contributions to medical and dependent care flexible spending accounts (FSAs) with federal regulations. Specifically, it establishes that the maximum salary reduction for contributions to medical FSAs will be determined by the annual inflation-adjusted limit set forth in section 125 of the federal Internal Revenue Code, while the limit for dependent care FSAs will follow the guidelines established in section 129 of the same code. This change applies to employees and employers across the State, local governments, and school districts.

The bill also clarifies that contributions to these FSAs will continue to be treated as regular compensation for pension calculations and retirement allowances, while remaining exempt from federal tax withholding as permitted by federal law. The adjustments to the contribution limits will take effect immediately upon the bill's enactment, ensuring that public employees can benefit from the most current federal guidelines regarding FSA contributions.

Statutes affected:
Introduced: 52:14-15.1, 18A:16-19.1, 40A:10-23.5