New Jersey Statement in Support of Exclusion for Amounts Recieved Under Accident and Health Insurance Plan for Personal Injuries or Sickness

Statement in Support of Exclusion for Amounts Recieved Under Accident and Health Insurance Plan for Personal Injuries or Sickness
NJ-2440 Statement in Support of Exclusion for Amounts Received Under Accident and Health Insurance Plan
Statement in Support of Exclusion for Amounts Received
Under Accident and Health Insurance Plan
for Personal Injuries or Sickness

NJ-2440
(6-22)

	

Year

Employee:

	

Employer:

	

Soc. Sec. No.
I.D. No.

Periods of Sickness

From

To

Number
Paid Days

Minus

Initial
Period

Allowable Sick
Days

x

Daily Rate
of Pay

=

–

x

=

–

x

=

–

x

=

–

x

=

–

x

=

–

x

=

–

x

=

–

x

=

–

x

=

Sick Pay

Total Sick Pay For Year
This is to certify that the payment(s) set forth above meet all three criteria in N.J.A.C. 18:35-2.3
	
	

Authorized Signature of Employer

	
	

Title	

Date

Gross Income Tax

Employee Accident or Health Insurance Exclusion
N.J.A.C. 18:35-2.3
18:35-2.3 	 Employee accident or health insurance
	
exclusion from taxable gross income
(a) Amounts received by an employee through an accident or
health insurance plan for personal injuries or sickness are not
subject to tax under the New Jersey Gross Income Tax Act.
(b) Amounts received by an employee on account of personal
injury or sickness qualify for exclusion from taxable gross income
when received under the provisions of an employee accident or
health insurance plan which satisfies the following requirements:
1.	 The payments must be compensation for wage loss which
results from absence due to injury or sickness of the employee; and
2.	 The payments must have a requisite certainty under an
enforceable contractual obligation under the plan (see (e)
below); and
3.	 The payments must not relate to sick leave wage continuation, the taking of which is largely discretionary and the
payments are made regardless of the reason for absence
from work.
(c) The exclusion from taxable gross income applies to payments
to employees under a health or accident insurance plan regardless of whether insurance coverage is with a commercial insurance company to which premiums are paid by both employees
and employer or solely by the employer; or whether insurance
coverage is provided by an employer’s self-insured plan for which
no insurance premiums are paid by the employees.
(d) The exclusion from taxable gross income applies to payments
required to be made to employees under the State mandated temporary disability benefit plan pursuant to the New Jersey Temporary Disability Law (N.J.S.A. 43:21-25, et seq.). Payments which
are excludable from taxable gross income include temporary
disability benefit payments required to be made under the State
Plan which is administered by the Bureau of State Plan Disability
Benefits under the New Jersey Disability Law. Exclusion from taxable gross income also includes payments required to be made to
employees under a company’s private plan established pursuant
to New Jersey law in lieu of the State Plan described in the preceding sentence and which has been approved by the Bureau of
Private Plan Disability Benefits, Division of Unemployment Insurance and Disability Insurance.
(e) Where payment to employees under the health or accident
insurance plan is largely discretionary with the employer, such as
during the initial period (for example, first seven days), the exclusion from taxable gross income does not apply. Such payments
to the employee are subject to tax as wages and salaries. In
order for a wage loss payment made under an accident or health
insurance plan to be excludable from taxable gross income, the
payment to the employee must have a requisite certainty under an
enforceable contractual obligation.
(f) Withholding of the gross income tax shall be required on all
payments of wages and salaries made to an employee by an
employer. The withholding of the tax is required even though such
payments meet all the conditions for exclusion from taxable gross
income as made through an accident or health insurance plan for
personal injuries or sickness under this section. The only exceptions for the withholding of tax shall be for the following:

1.	 Temporary disability benefit payments required to be
made under the State Plan which is administered by the
Bureau of State Plan Disability Benefits under the New
Jersey Disability Law;
2.	 Temporary disability benefit payments required to be
made to employees under a company’s private plan
established pursuant to New Jersey law in lieu of the
State Plan described in (f)1 above and which has been
approved by the Bureau of Private Plan Disability Benefits, Division of Unemployment Insurance and Disability
Insurance; and
3.	 Payments made to employees for personal injuries or
sickness under a health or accident insurance policy by a
commercial insurance company.
(g) All taxpayers will be required to file with their annual New
Jersey Gross Income Tax Return a claim form furnished by the
Director for the exclusion of any amounts received by them as
an employee through an accident or health insurance plan for
personal injuries or sickness which meet all the conditions for
exclusion from taxable gross income under (f) 1, 2 and 3 above.
Examples:
i. An employee of Company X is allowed 12 vacation days and 15
sick days for the calendar year. The employee uses 12 vacation
days and 10 sick days in the calendar year for which he or she
receives his or her regular wage payment, regardless of the cause
for his or her absence. The amounts received by the employee
in the calendar year for the 12 vacation days and 10 sick days
are subject to tax as wage and salary income to the employee
and the employer must also withhold Gross Income Tax on such
payments.
ii. Company Y has a self-insured disability plan for its employees
who are absent from work because of accident or sickness. The
plan is fully funded by the employer company and the employees
make no contribution to the plan. Payment for the full amount of
wages is made to disabled employees absent from work, on the
eighth calendar day. Payment for the initial seven days to the
covered employee is discretionary with the company employer
under the plan. The amount received by the absent employee
because of his or her disability is excludable from taxable gross
income as health or accident insurance after the initial seven days
of absence but is subject to withholding tax. Any amount received
by the employee as payment for the seven initial days is subject
to tax as wage and salary income to the employee and is also
subject to withholding tax.
iii. Employee C receives a payment from the New Jersey Disability Benefit Fund during an absence from work because of
temporary disability resulting from illness. Both the employee and
employer have contributed to the disability benefit fund. The total
amount received by the employee from the New Jersey Disability Benefit Fund is excludable from taxable gross income as a
payment for health or accident insurance and is not subject to
withholding tax.
iv. Employee D is absent from work because of illness and
receives from the X Insurance Company the full amount of his or
her wages during the period of his or her absence from work. The
payment was made from a health or accident insurance policy to
which only the employer has contributed. The amounts received
by the employee are excludable from taxable gross income as
health or accident insurance and are not subject to withholding
tax.