mariemonroe

FICA Alternative Plan and reduction in social security benefits

2 posts in this topic

I have a client with a 457(b) FICA Alternative Plan. The employer contributes 13% of compensation to each employee's account and the employee has the option to defer more (up to the applicable limit).

Employees are starting to realize their social security benefits (primary or spousal) are reduced below their expectations.

The employer understands the reduction due to the employer contribution, but is having a hard time understanding the reduction due to the employee's discretionary deferrals.

My understanding is that:

1. the discretionary elective deferrals are not subject to FICA when deferred

2. the reduction in benefits is determined by either WEP or GPO and doesn't really delineate between what the employer contributed and what the employee elects to contribute.

Am I missing something?

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I don't think I explained myself very well.

This is a non-Social Security State.

Assuming a participant is receiving a spousal benefit or had a job prior to the one with current employer, then the participant may be entitled to a social security benefit.

As I understand it, that social security benefit may be reduced under either WEP or GPO.

I think my question boils down to:

is the amount of the reduction affected by the fact that the participant made an elective deferral into the FICA Alternative Plan.

For example, if the FICA Alternative Plan had two participants with identical work histories in terms of employers, DOHs and DOTs at each employers and compensation at each employer.

Both participants work at a governmental entity offering a FICA Alternative 457(b) Plan that includes a mandatory employer contribution of 13% of compensation and optional employee salary deferrals up to the statutory limit.

One participant defers an additional amount of salary and the other does not.

Would the participant who defers his or her salary get a greater reduction in social security benefits that the participant who does not defer his salary?

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