Ask the Experts – Contributions to 457(b) Plans Subject to FICA

“Are EMPLOYER contributions to a 457(b) plan subject to FICA taxes? Is the answer different for matching contributions than it is for nonelective (base) contributions?”

Stacey Bradford, Kimberly Boberg, David Levine and David Powell, with Groom Law Group, and Michael A. Webb, vice president, Retirement Plan Services, Cammack Retirement Group, answer:

Unlike employer contributions to a 403(b) plan, which are generally NOT subject to FICA, employer contributions to a 457(b) plan are indeed subject to FICA taxes. And the type of contribution makes no difference—all contributions to a 457(b) plan are considered “deferrals” whether contributed by the employer or employee, and are therefore subject to FICA.

The exception to this rule is if the employee is not subject to FICA taxes in general, as is the case for certain state and local government employees that are members of a retirement system. Thus, plan sponsors that make employer contributions to a 457(b) plan should make certain that the necessary steps have been taken with their payroll provider so that such contributions are properly included as wages for FICA purposes.

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.