403(b) Employer Contributions - Subject to FICA Tax?

Question:

Are 403(b) retirement plan contributions made on behalf of the minister by the church subject to FICA tax? (The amount contributed was not deducted from the minister's salary; it was made by the church as an employee benefit.)

Answer:

Simply put, employer contributions are not subject to FICA tax.

However, this is a good opportunity to review elective deferrals. Elective deferrals are monies chosen by employees to be deducted from their paychecks and contributed to the employer-sponsored retirement plan.

Non-minister employees who choose elective deferrals do not reduce the amount of FICA wages that need to be reported. In other words, the elective deferrals are subject to FICA tax.

Ministerial employees are not subject to FICA tax in the first place (read our March 21, 2011 blog post for more info). Therefore, any monies the minister defers to the employer-sponsored retirement plan are not subject to FICA tax.

For a review on the 403(b) contribution limits for 2014-2015, read our November 24, 2014 blog post.

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MinistryCPA - Corey A. Pfaffe, CPA, LLC

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