Ask the Experts!

The professionals at Advanced Underwriting Consultants (AUC) answer the tax questions posed by producers.  Here’s the question of the day.

Question: I know pension plan contributions are generally not subject to income taxes.  Are they subject to Social Security taxes?

Answer: In general, only employee deferral contributions are subject to Social Security taxes.  Employer contributions are not subject to Social Security taxes.

Social Security taxes consist of

• The Old-age, Survivors, and Disability Insurance (OASDI) portion, which is 6.2%
• The Medicare portion, which is 1.45%

Both the employer and employee have to contribute these amounts—7.65% for each—to wages up to $110,100 in 2012.  The Medicare portion only applies to compensation in excess of that.

Amounts distributed to an employee from a qualified plan are generally income taxable, but are not subject to Social Security taxes.

Have a question for the professionals at AUC?  Feel welcome to submit it by email.  We may post your question and the answer as the question of the day.