Steamboat Posted February 17, 2021 Share Posted February 17, 2021 A participant defers a portion of his salary in January until termination, and each month the deferral account is credited with 4% interest. When FICA tax is paid at the end of the year (using the rule of convenience), does the amount subject to FICA include the original amount of salary deferred plus the interest accrued throughout the year, or is the amount subject to FICA only the original amount of salary deferred? Link to comment Share on other sites More sharing options...
EBECatty Posted February 17, 2021 Share Posted February 17, 2021 I think you need to include the interest accrued throughout the year. See Example 2 in Treasury Reg. 31.3121(v)(2)-1(c)(4), which seems to be close to your fact pattern. Luke Bailey 1 Link to comment Share on other sites More sharing options...
CuseFan Posted February 18, 2021 Share Posted February 18, 2021 Agreed, the amount subject to FICA is the benefit accrued (balance) up to the point FICA is applied, but then any incremental interest thereafter is not subject to FICA. Luke Bailey 1 Kenneth M. Prell, CEBS, ERPA Vice President, BPAS Actuarial & Pension Services kprell@bpas.com Link to comment Share on other sites More sharing options...
Belgarath Posted February 18, 2021 Share Posted February 18, 2021 Deleted. I originally didn't look at the title of the forum here, and mistakenly assumed it was 401(k) deferrals, so my comment was inapplicable! Link to comment Share on other sites More sharing options...
XTitan Posted February 19, 2021 Share Posted February 19, 2021 The only other item I'd add is whether 4% is "reasonable" and whether any portion of the 4% earnings after the balance is taken into account is still subject to FICA. - There are two types of people in the world: those who can extrapolate from incomplete data sets... Link to comment Share on other sites More sharing options...
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