Employers' Pensions and Benefits Administration Manual (EPBAM)
   

 

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New Jersey State Employees
Deferred Compensation Plan (NJSEDCP)
Emergency Withdrawal


Changes in the Administration of the NJSEDCP
 
Emergency Withdrawal
 
 

Guidelines

 
 

Federal Tax Implications

 
 

State Tax Implications

 
 
Additional Information
 
 

Employer Procedures Guide

 
 

Determining  Eligibility

 
 

Enrollment Background

 
 

Catch-up Provisions

 
 

Death Provisions

 
 

Distribution Process and Requirements

 


Changes in the Administration of the New Jersey State Employees Deferred Compensation Plan

On October 25, 2005, the State Treasury and New Jersey State Employers Deferred Compensation Board announced that Prudential Retirement, a business of New Jersey-based Prudential Fianancial, has been selected as the third party administrator for the New Jersey State Employees Deferred Compensation Plan (NJSEDCP). Because of this upcoming change in the administration of the NJSEDCP, effective January 1, 2006, some of the information provided below may no longer be accurate. The Division of Pensions will provide procedural updates regarding the NJSEDCP as soon as they become available.

Emergency Withdrawal

Guidelines

If an employer/employee relationship exists, a Plan participant may request an amount needed to meet an emergency, up to the balance of his/her Deferred Compensation account.

The Deferred Compensation Plan is subject to the rules and regulations of the Internal Revenue Service Code 457. The guidelines set by IRS Code 457 are very specific concerning what constitutes an "unforeseeable emergency".

The code states:

"A severe financial hardship to the participant, resulting from a sudden and unexpected illness or accident of the participant or of a dependent of the participant, loss of the participant's property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the participant."

In order to qualify for an emergency withdrawal, the financial hardship must be one that cannot be relieved by:

  1. reimbursement or compensation by insurance or otherwise,

  2. liquidation of the participant's assets to the extent that liquidation of such assets would itself cause severe financial hardship, or

  3. cessation of deferrals under the Plan.

Upon request to the Deferred Compensation Office, an Application for Emergency Withdrawal will be provided to Plan participants. The application must be returned, along with supporting documentation, to the Deferred Compensation office. Participants may be contacted to provide additional documentation if necessary. Within ten working days of receiving the completed application and all supporting documentation, the Administrator shall determine whether the participant qualifies for withdrawal under the interpretation of the IRS Code.

If the Administrator denies the request for an emergency withdrawal, the participant may appeal the decision by writing to the Deferred Compensation Board.

All verbal requests for emergency withdrawal through the employee's payroll center should be directed to the Deferred Compensation Plan Office for attention (609) 292-3605). The Deferred Compensation Office will review the guidelines with the participant and determine if the participant has cause to file a request for emergency withdrawal and an accompanying Financial Profile form.

Federal Tax Implications

Contributions into the New Jersey State Employees Deferred Compensation Plan are exempt from federal income tax withholding. All distributions from the Deferred Compensation Plan are deemed to be supplemental wages and, as such, according to Revenue Ruling 82-46, are subject to federal income tax withholding. The Deferred Compensation Plan currently withholds federal income tax based upon information provided to the Plan on Form W-4, Employee’s Withholding Allowance Certificate.

Those receiving distributions from Deferred Compensation will be issued a W-2 for the applicable tax year. Distributions are considered wages for the tax year in which they are received and will be taxed accordingly.

State Tax Implications

The New Jersey State Employees Deferred Compensation Plan will issue, in the appropriate tax year, a W-2 that includes the State taxability of Deferred Compensation distributions. All contributions into the Deferred Compensation Plan have been subject to State taxes. Only the gain portion of the distribution will be included as income for State tax purposes.

 

 

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Last Updated: December 6, 2005