1. a. The Department of Education, the Commission on Higher Education, and the governing body of any public institution of education may enter into a written agreement with any of its employees to reduce the employee’s annual salary for the purpose of investing in a tax-deferred annuity for the employee pursuant to section 403(b) of the federal Internal Revenue Code of 1986 (26 U.S.C. § 403(b)), as amended. Investments shall be (1) with an insurer or mutual fund company authorized to provide investment contracts under the alternate benefit program; (2) in investment contracts authorized under the program for supplemental retirement benefits which meet the requirements of section 403(b) of the federal Internal Revenue Code (26 U.S.C. § 403(b)), as amended; and (3) on the same terms and conditions provided for participants in the alternate benefit program.

b. An agreement (1) shall specify the amount and the effective date of the reduction; (2) shall be subject to filing with and approval by the State Treasurer or filing with and approval by the governing body of the institution of public higher education, as appropriate; and (3) shall be legally binding and irrevocable with respect to the amounts earned while the agreement is in effect. The total amount of the reduction in an employee’s salary pursuant hereto, for any calendar year, shall not exceed the lesser of (a) the applicable dollar amount or (b) the participant’s Includible Compensation for the calendar year. Includible Compensation is an employee’s actual wages in box 1 of Form W-2 for a year for services to the employer, but subject to a maximum of $200,000, or such higher maximum as may apply under section 401(a)(17) of the federal Internal Revenue Code (26 U.S.C. § 401(a)(17), and increased up to the dollar maximum by any compensation reduction election under section 125, 132(f), 401(k), 403(b), or 457(b) of the federal Internal Revenue Code (26 U.S.C. § 125, 132(f), 401(k), 403(b), or 457(b)). The amount of Includible Compensation is determined without regard to any community property laws. The applicable dollar amount is the amount established under section 402(g)(1)(B) of the federal Internal Revenue Code (26 U.S.C. § 402(g)(1)(B)), which is $16,500 for 2011, and is adjusted for cost-of-living after 2011 to the extent provided under section 415(d) of the federal Internal Revenue Code (26 U.S.C. § 415(d)). The total amount of the reduction in an employee’s salary pursuant hereto, for any calendar year, when added to the contributions made in the year on behalf of the employee in accordance with section 7 of P.L.1963, c.123 (C. 52:18A-113), exceed the limitations set forth in section 415 (c) of the federal Internal Revenue Code (26 U.S.C.s.415 (c)). For the purposes of this section, if the participant is or has been a participant in one or more other plans under section 403(b) of the federal Internal Revenue Code (26 U.S.C. § 403(b)), and any other plan that permits elective deferrals under section 402(g) of the federal Internal Revenue Code (26 U.S.C. § 402(g)), then this plan and all such other plans shall be considered as one plan for purposes of applying the foregoing limitations.

c. An agreement may be terminated at any time upon written notice by either the employee or the employer. Termination shall take effect at the beginning of the payroll period whose first day is nearest to the 30th day following the day on which notification of termination was (1) received by the employer, in the event termination is initiated by the employee, or (2) sent to the employee, in the event termination is initiated by the employer.

d. Amounts payable pursuant to this section by an employer on behalf of an employee for a payroll period shall be transmitted and credited not later than the fifth business day after the date on which the employee is paid for that pay period.

e. The plan described in subsection a. of this section shall be known as the New Jersey Additional Contributions Tax-Sheltered Program.

L.1995, c.92, s.1; amended 1999, c.247, s.4; 2011, c.78, s.70.