Maximizing NJ Maternity Benefits

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Jags4186
Posts: 3916
Joined: Wed Jun 18, 2014 7:12 pm

Maximizing NJ Maternity Benefits

Post by Jags4186 » Mon Dec 02, 2019 9:33 am

My wife and I are expecting our first child in late July 2020. New Jersey recently passed a law expanding its paid parental leave. As I understand it, starting July 1 you will receive 85% of your wages up to $859/wk for 12 weeks. I’m looking to handle this the most optimal way possible.

My wife currently earns $59,300/yr. Assuming she works through June 30 and stays home for the remainder of the year her earned income would be $29,650. My thought was to have her increase her 401k contribution to $1500 per pay period so she would max out the $19500 in her 13 paychecks. Additionally, I would have her max out her HSA $461.54 per paycheck for 13 weeks (her company matches $2k/yr so for half a year she’d get $1000 match). Her company pays 100% of our health insurance premiums so there is nothing to deduct for that. I’d also have her increase her allowances so she has practically no FICA or NJ State taxes taken out

This would leave her with the following:
Gross Income: $29,650
401k: -$19,500
HSA: -$ 6,000
FICA: -$ 1,809
NJ SUI/SDI: -$ 119
Federal/NJ Tax: -$ as little as possible
Take home pay: $2,222 / 13 = $171/paycheck

My only concern is...what does NJ count as “wages” when determining FLI payout? If she only is burning home $2,328 over 6 months would she be entitled to her $859/wk in FLI or would she not really qualify for much since we’re stashing as much away as possible into tax advantaged accounts?

edit: fixed some terminology
Last edited by Jags4186 on Tue Dec 03, 2019 1:05 pm, edited 2 times in total.

HomeStretch
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Joined: Thu Dec 27, 2018 3:06 pm

Re: Maximizing NJ Maternity Benefits

Post by HomeStretch » Tue Dec 03, 2019 6:43 am

Jags4186 wrote:
Mon Dec 02, 2019 9:33 am
... I’d also have her increase her allowances so she has practically no FICA or NJ State taxes taken out

This would leave her with the following:
Gross Income: $29,650
401k: -$19,500
HSA: -$ 6,000
SS & Medicare: -$ 1,703
NJ SUI/SDI: -$ -119
FICA/NJ Tax: -$ as little as possible
Take home pay: $2,328 / 13 = $179/paycheck
Increasing W-4 allowances only affects Federal and state income tax withholdings. The employer is required to withhold FICA at 7.65% on your spouse’s eligible wages.

Google says the NJ leave benefit paid is based on employee’s average weekly wage which is likely your wife’s weekly gross income (and not her take home pay). Her employer will probably update the employee handbook / company leave policy on January 1st to reflect the new NJ law so keep an eye out for that.

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simplesimon
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Location: Boston, MA

Re: Maximizing NJ Maternity Benefits

Post by simplesimon » Tue Dec 03, 2019 6:52 am

Is the benefit taxable? If so, the calculation is probably based on gross earnings.

I did some googling for you: https://myleavebenefits.nj.gov/worker/fli/

Go down to "How Benefits Are Calculated".

Topic Author
Jags4186
Posts: 3916
Joined: Wed Jun 18, 2014 7:12 pm

Re: Maximizing NJ Maternity Benefits

Post by Jags4186 » Tue Dec 03, 2019 1:04 pm

HomeStretch wrote:
Tue Dec 03, 2019 6:43 am
Jags4186 wrote:
Mon Dec 02, 2019 9:33 am
... I’d also have her increase her allowances so she has practically no FICA or NJ State taxes taken out

This would leave her with the following:
Gross Income: $29,650
401k: -$19,500
HSA: -$ 6,000
SS & Medicare: -$ 1,703
NJ SUI/SDI: -$ -119
FICA/NJ Tax: -$ as little as possible
Take home pay: $2,328 / 13 = $179/paycheck
Increasing W-4 allowances only affects Federal and state income tax withholdings. The employer is required to withhold FICA at 7.65% on your spouse’s eligible wages.

Google says the NJ leave benefit paid is based on employee’s average weekly wage which is likely your wife’s weekly gross income (and not her take home pay). Her employer will probably update the employee handbook / company leave policy on January 1st to reflect the new NJ law so keep an eye out for that.
Thanks -- I had the numbers right and just got crossed on the terminology. I corrected the OP.

Will do. Since the leave law takes effect on 7/1/20 I'm curious how the handbook will handle. I think essentially saving her entire paycheck for 6 months into tax advantaged account will give us some practice for the minimum of 3 months we'd have with only 1 income. Having run out a few pro formas it seems we won't really be losing that much income due to tax savings...at least for year 1.

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