As of June 2014, amounts deferred in 401(k) plan contributions are subject to FICA tax. However, according to the Internal Revenue Service, 401(k) contribution amounts are not considered as income for federal income tax purposes.
There are several types of 401(k) plans available to employees. These include traditional plans, safe harbor plans and SIMPLE plans. According to the IRS, traditional 401(k) plans provide for basic pre-tax elective deferrals or Roth contributions through payroll deductions. Safe harbor plans exempt employers from performing the annual ADP or ACP tests that are required in traditional plans if the plan meets the safe harbor requirements under the IRS. SIMPLE 401(k) plans are not subject to ADP or ACP tests and are only available to employers with 100 or fewer employees; the employee must also have received $5,000 or less in contribution the previous calendar year.
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