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403 b and FICA tax

I have never managed or participated in a 403b plan, but I am helping out a company that has one. The employer is telling me that the contribution is exempt from FICA.

I’m trying to research and took this from the IRS:

Employer contributions (within dollar limitations) are tax-deferred and exempt from FICA. Employee elective contributions to 403(b) plans that are considered employer contributions pursuant to a salary reduction agreement are deferred from income tax, but taxable for FICA.

So...
My interpretation is that the employer matching contribution (if any) is not subject to FICA but that the employee’s contribution is, and therefore the company has to pay the employer FICA share as well. Is that correct? She is telling me no, they have a FICA savings of 7.65% of the employees contribution.

Thanks in advance
Kathie

Comments

  • Hello Kathie,
    The 403(b) contributions are taxable for FICA in the same way 401(k) contributions are covered. There may be certain governmental entities whose employees are still exempt from FICA (covered by a state or municipal plan) in which case, the employee may not be subject to FICA for any wages.

    The reason is the salary deferral contributions are deferred only for income taxes, not for FICA. That is, they are still FICA wages. Employer contributions to qualified plans are not subject to FICA.

  • KathieKathie ✭✭
    Thanks so much Patrick
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