457(b) employer match

[alexa]

We have a 457(b) plan where we match 10% of an employee's elective deferral.

I know that the 457(b) employee contribution is state taxable in PA but what about the 457(b) employer match?

The match is 100% vested immediately; we match each pay period

Thanks

Lexy

[Carol V. Calhoun]

PIT Bulletin 2005-04 states as follows:

(1) Contributions made under wage or salary deduction arrangements.Amounts lawfully deducted and withheld from the compensation of an employee and set aside under an eligible deferred compensation plan in a trust for the exclusive benefit of participants and their beneficiaries are received by the employee as compensation at the time the deduction is made. This requirement applies whether or not such amounts are subject to a substantial risk of forfeiture or are available or transferable.
(2) Contributions made under cash or deferred arrangements or salary reduction plans. Contributions set aside in a trust for the exclusive benefit of participants and their beneficiaries under an eligible deferred compensation plan that are made by an employer on behalf of an employee at the election of the employee pursuant to a cash or deferred arrangement or salary reduction agreement are received by the plan participant as compensation at the time the contribution is made. This requirement applies whether or not such contributions are subject to a substantial risk of forfeiture or are available or transferable and regardless of when the election is made or a payment is received.

Because the focus is on whether the amount is deducted from the employee's compensation, not on the type of plan to which it is contributed, an employer match should not be subject to Pennsylvania state tax.

That being said, at the federal level, the employer match to a 457(b) plan is subject to the $18,000 limit on total contributions. This contrasts with a 401(k) or 403(b) plan, in which only employee deferrals are subject to the $18,000 limit. Thus, if we're talking about a governmental 457(b) plan, it may make sense to have the employee deferrals made to the 457(b) plan, but the employer match made to a 401(a) plan. Of course, this doesn't work for a 457(b) plan of a nongovernmental employer.

[alexa]

Our match is very small capped at $800/year:)

thanks