(b)lines Ask the Experts – Contributions as a Condition of Employment

September 11, 2012 (PLANSPONSOR (b)lines) – “How are 403(b) contributions made as a condition of employment (i.e., as defined under Treasury regulation 31.3121(a)(5)-2(a)(3)) reported on a W-2?  Since they are subject to FICA but aren’t ‘elective deferrals’ presumably they are included in boxes 3 & 5 of the W-2 and not in box 12.

“If you know of any source to review for this information (we checked the W-2 instructions), it would be appreciated!”  

Michael A. Webb, Vice President, Retirement Plan Services, Cammack LaRhette Consulting, answers:  

Good question, since you are quite correct that Box 12 of the W-2 limits reporting to 403(b) ELECTIVE deferrals, and not contributions from salary that are mandatory as a condition of employment under Treasury regulation 31.3121(a)(5)-2(a)(3). However, the contribution is indeed included in FICA and Medicare wages in Boxes 3 and 5, respectively, and, since it is not an employer contribution, presumably must be reported somewhere on the W-2.    

So where is there an opportunity in the W-2 to report contributions as a condition of employment? Box 14 appears to allow for reporting of such contributions, as the following excerpt from the Form W-2 instructions indicate:   

“In addition, you may enter the following contributions to a pension company plan: (a) nonelective employer contributions made on behalf of an employee, (b) voluntary after-tax contributions (but not designated Roth contributions) that are deducted from an employee’s pay, (c) required employee contributions (our emphasis), and (d) employer matching contributions.”   

Now, the Experts would have preferred a reference to the specific Treasury regulation in the Box 14 instructions here. However, as a practical matter, in our experience we have seen employers utilize this Box for reporting contributions as a condition of employment, often with a specific identifier to indicate that these are mandatory 403(b) contributions as opposed to elective deferrals, such as “M403B”.    

And, as a reminder to all readers, these contributions made as a condition of employment, though withheld from salary, are NOT elective deferrals and are thus NOT subject to the 402(g) elective deferral limits.    

Thanks for the question!  


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.