457 employee deferrals

[Guest agordon]

I don't handle many 457 plans, so any advice will be appreciated. I'm working with a client on coding their payroll system for employee deferrals for the 457 plan - are the 457 deferrals treated as pre-tax deferrals for payroll (similar to the 401k deferrals)?

thanks!

[Guest dietpepsi]

Yes, FiCA and Futa should be withheld before submitting to the plan. Any "employer" contributions are also treated as deferrals so FICA and FUTA should be withheld. However, some states do not recognize deferrals to 457 plans and 403(b) plans as exempt from State withholding, so the deferrals might not be pre tax for state purposes.

[mbozek]

It depends on the type of 457 plan. Under a 457(b) plan, fica/futa is payable in the year the amount is deferred because the contributions are 100% vested. See IRC 3121(v). If the amt is contributed under a 457(f) plan the deferrals are vested in the year when there is no requirement to perform substantial services, e.g., termination. Also very few states tax 457(b) deferrals-only PA and NJ come to mind. And if the contributions are subject to a risk of forfeitue then the amounts will be taxed in the year the forfeiture risk ends.

[401 Chaos]

Mbozek and Dietpepsi,

Regarding FICA taxation of employer contributions, do employer "matching" contributions contributed to a 401(a) plan operated in tandem with a 457(b) plan escape FICA taxes as with typical 401(a) contributions or is there any guidance suggesting that they should also be viewed as employer contributions under a 457(b) and thus subject to FICA taxes when deferred?