When are employer contributions considered taxable for FICA/Med?

[Guest jrschmid]

What is the distinction between employer contributions to a 457(b) plan and a 401(k) plan that makes the employer contributions to a 457 reportable as earnings and taxable for FICA/Med/FUTA but not employer contributions to a 401(k) plan?

I'm attaching a copy of IRS Notice 2003-20 that seems to indicate that employer contributions to 457(b) plans are included as earnings and subject to FICA/Medicare. I don't see anything that indicates that the same might be true for employer contributions to a 401K are similarly subject to those reporting requirements but I don't want to assume that to be the case.

Can someone please explain what is behind this apparent difference?

457B_IRS_Guidelines.pdf

[Kimberly S]

Employer contributions to a 401(k) plan are not considered to be wages and therefore are not subject to FICA, Medicare or FUTA. Salary deferrals, however, are subject to those things.

I don't know the 457 rules.

[Guest jrschmid]

That's the sense I get but it appears that 457 contributions ARE considered to be wages in that respect. I'm curious as to what that nuance entails. Thanks for your reply!

[Don Levit]

I have read over several IRS documents, and they seem to be very confusing in regards to differentiating between employer and employee contributions.

In addition, some contributions are excluded from income tax and FUTA, but not FICA.

Does this address any of your concerns?

Don Levit

[XTitan]

That's the sense I get but it appears that 457 contributions ARE considered to be wages in that respect. I'm curious as to what that nuance entails. Thanks for your reply!

The distinction is that 457(b) plans are nonqualified plans, so the FICA rules under 3121(v) apply.

[Don Levit]

I am not real acquainted with this area, bit I did find TAM 200305006 very illuminating.

Don Levit