401(a) or FICA / Social Security Alternative Plans

[Guest sammyg]

Can someone explain to me the difference between a 401(a) and a FICA / Social Security Alternative Plan? Doing various searches on the web I cannot find a clear distinction between these. In some cases I'm thinking that a FICA / Social Security Alt Plan is also a 401(a).

I've noticed that TIAA Cref, Fidelity and other large carriers provide these plans typically to universities, some non-profits. Some plan descriptions explain that their plan mandates participation and the previous employee FICA payment of 6.2% will now become a 7.5% contribution into the new plan thus eliminating Social Security. Other 401a plan descriptions never mention this.

So, is a FICA / Social Security Alternative Plan an option within a 401(a)? Can this also be an option within a 403(b)?

Thanks in advance for your time.

[eeyore]

Section 401(a) of the Internal Revenue Code is the chief section that allows for all sorts of retirement plans sponsored by corporations, governments, charitable organizations, etc. The plans include defined benefit retirement plans, cash balance plans, profit sharing plans, etc. Section 403(b) is another section that allows only certain sponsors (in health or education) to offer certain annuity plans. A FICA / Social Security Alternative Plan can be set up under either under Section 401(a) or 403(b), or for that matter, it could be set up under Section 457, another Internal Revenue Code section allowing for certain plans maintained by governments and non-profits.

A FICA / Social Security Alternative Plan is a plan that is usually set up by government employers which are not covered under Social Security, usually for part-times or support personnel who aren't covered by the employers main retirement plan. For example, teachers and most school personnel in Texas belong to a statewide Teacher Retirement System, and Texas school districts do not participate in Social Security. The school district, however, might put part-timers like crossing guards who are not eligible for the Teacher Retirement System into a FICA / Social Security Alternative Plan.

So Section 401(a) plans encompass many different kinds of plans and sponsors, while the FICA / Social Security Alternative Plan is just one very minor subcategory.