Multiemployer 401(k) Plan

[luissaha]

I work mainly with mutiemployer defined benefit and welfare plans, so this is probably a basic question. I noticed on a multiemployer 401(k) plan that some employers may not be paying FICA and FUTA on elective deferrals. It also appears there is no withholding for the employee portion of FICA and FUTA. It is my understanding that elective deferrals are subject to FICA and FUTA and the employer and employee must pay their respective shares. It appears that some employers contributing to the plan are paying FICA and FUTA on the adjusted gross income of their employees (i.e., the employers are not paying the FICA on FUTA on the deferrals) and the employee portion is not being withheld from the deferral amounts.

Am I correct that employers must pay FICA and FUTA on the deferrals and that paying FICA and FUTA on on the adjusted gross income is wrong? What about the employee portion of FICA and FUTA? Should that be withheld from the deferral amount?

Any help would be appreciated.

[hr for me]

Directly from the IRS 401k Plan Fix-it Guide:

"Although the law doesn't treat amounts deferred as current income for federal income tax purposes, they are included as wages subject to Social Security (FICA), Medicare and federal unemployment taxes (FUTA)." http://www.irs.gov/Retirement-Plans/401(k)-Plan-Fix-It-Guide---401(k)-Plan---Overview

[masteff]

But it's an employer payroll tax issue, not a plan issue. From a professional ethics point of view, I'd say at the outside most to mention to the employer that they might need to review their payroll practice. You could refer them to IRS Publication 15, page 40, "Retirement and pension plans".