waid10

457(b) Deferrals - Impact on Social Security Earnings

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Hi.  I work for a governmental entity and participant in a governmental 457(b) plan.  I make elective deferrals into the 457(b) plan.  How do those deferrals impact my future social security benefit?  For example, if my salary is $100k, but I defer $15k into the 457(b), are my reportable earning to SS the $85k?  I just want to make sure that I am not suppressing my future SS benefit by deferring into my 457(b) account.

Thanks.

Edited by waid10

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You might be. Generally not subject to FICA unless pursuant to IRC 3121(b)(7)(E)  re agreements under Section 218 of SS Act, or IRC 3121(b)(7)(F) re employees who are not covered by a state or local retirement system. I'm sure some other folks here can give you a better answer - but I'd run your question by a competent tax advisor, plus asking your benefits/HR person if they are competent, because there could be substantial ramifications for your future SS benefits, as you've noted. I don't think most people ever ask this question.

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If your wages are subject to FICA, then your deferral into the 457(b) plan should also be subject to FICA, thus not reducing your compensation for the 35-year average compensation used for determining your social security benefits.

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