The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA) increased employees' retirement savings opportunities under defined contribution retirement plans. However, although the federal income tax window for higher deferrals opened promptly on January 1, 2002, many states' income tax laws did not automatically adopt those changes. As a consequence, there was a serious possibility that items that were excluded from income under federal law would nevertheless be taxable under state law, and employers would have different state and federal income tax withholding and reporting responsibilities.* However, since then almost all of the nonconforming states have amended their tax laws to avoid this dilemma.

• Arkansas Although Arkansas has not yet amended its tax law because their legislature, which meets every two years, has not met since the conformance issue arose, an amendment to the state law to conform to EGTRRA is expected. Until the state legislature meets to discuss the issue in 2003, the state revenue department is taking a no-action position.
• New Jersey New Jersey is in partial conformance. Under its state tax code, catch-up contributions authorized by EGTRRA are not taxable if made to §401(k) plans, but are included in the employee's state-taxable income if made to §403(b) plans or §457 plans.
• Pennsylvania Pennsylvania does not recognize any employee pre-tax deferrals to retirement plans. This is a long-standing position that has not changed since the enactment of EGTRRA.