401(k) contributions and FICA

[Santo Gold]

This is probably too easy, but for payroll purposes, when an individual makes a 401(k) contribution, is that 401(k) amount subject to FICA? Does it make a difference if the 401(k) amount is made from a company bonus as opposed to regular payroll?

[Archimage]

Yes, it is subject to FICA.

[Santo Gold]

I guess I'm a little confused then. I thought one of the benefits to both an individual and an employer of an individual making 401(k) contributiions was to avoid certain tax consequences. Can I assume that means the individual avoids federal income taxes but the employer does not avoid FICA/FUTA taxes?

Thanks

[wmyer]

The employer and employee still have to pay FICA on the deferrals. However, they do not have to pay federal tax until withdrawn. Also, most states don't require state tax until withdrawn. But, when you withdraw the money, the current tax system doesn't impose any FICA.