Tax Implications 

Taxability and Reporting on Form W-2

Pre-tax salary reductions under this plan reduce your taxable income for the year in Box 1 of Form W-2. Therefore these contributions are exempt from federal and state income tax at the time contributions are made.

See the chart under “Access Your Funds” for information about taxation when you withdraw these contributions. Salary reductions under this plan do not impact your Social Security and Medicare wages (Boxes 3 and 5), and therefore these taxes are withheld on your contributions.

Finally, the total reduction amount for the year is reported in Box 12a and Box 13 “Retirement Plan” will be checked. 

With the Roth post-tax election, your deductions are considered taxable income but the contributions accumulate tax deferred, and may be taken tax free in a qualified distribution. 

Retirement Savings Credit (“Saver’s Credit”)

If you participate in the Optional Retirement Plan, you may be eligible for income tax credit if your adjusted gross income falls into the qualified limits as defined by the IRS.

The amount of the credit that can be claimed varies with your filing status, adjusted gross income, and retirement contributions. Refer to the IRS website, IRS publications 571 (Chapter 10) or consult with your tax professional to see if you qualify.