401(a)

[willitsfire]

I am new to payroll, and I have a W-2 issue.  We have a CalPERS PEPRA retirement plan 401(a). Last year, one of my employee tax persons stated that 401 (a) should be deducted from the wages on the W-2 and in box 12.  According to IRS and another tax person I contacted for this year W-2's,  the 401 (a) should be in Box 14 on the W-2 and is not deducted from wages.  I have the 401 (a) in our payroll item list under deductions as NONE (as QB does not have 401 (a) listed), and when I issued my W-2's for employees this year, the 401 (a) contributions did not show up in any box on the W-2. What is correct?

[Anonymous_]

I will page @dmertz. Check back.

[dmertz]

I'm not particularly familiar with 401(a) plans in general and CalPERS in particular.  The following investopedia webpage on 401(a) plans in general suggests that it's the employer's choice whether contributions are pre-tax or after tax, but I don't know if that would be applicable to CalPERS.  If made pre-tax they would be excluded from box 1 of the W-2.  If made after tax they would be included in box 1 of the W-2 and would need to be tracked by the plan as after-tax-basis that would not be taxable when later distributed.

https://www.investopedia.com/terms/1/401a-plan.asp

[willitsfire]

Thank you, very helpful.  The 401 (a) is pre-tax defined benefit contribution.  So that would explain why it is not on the W-2? 

[BillM223]

I think "most" employers in this case would add an entry to box 14 of the W-2; however, most entries in Box 14 are just informational and would not affect the tax return (as it shouldn't if the employer has already removed the 401(a) contributions from Box 1 as dmertz said).

But since the entry in Box 14 would not affect the return, the employer can leave it out without hurting the taxpayer. The W-2 Instructions don't appear to require it.

@willitsfire

[willitsfire]

I think I am looking too much into this. Since it is pre-tax, would the pretax amount already be calculated in Box 1? For example, in this case, if the Gross Income is $30,000 but during the year the 401 (a) pretax contribution was$5,000, should Box 1 state $25,000?  I ran a summary before I printed my W-2s, in QB, and in this case $30,000 was listed as total gross pay in the summary, and $25,000.00 was listed in Adjusted Gross pay after the pre tax deduction (401 (a)). But when I issued the W-2's earlier today Box 1 was $30,00.00, and in my eyes, maybe should be $25,000 after the pre-tax deduction? Otherwise wouldn't you be paying taxes on it now and then when you take it out later on in retirement, therefore double tax? I have the 401 (a) listed as NONE in my Payroll item list since it is not listed.  

[BillM223]

Yes, if it is pre-tax, then as dmertz says, it would be removed from Box 1 before the W-2 is printed. This is how all the other pre-tax stuff is handled, like health insurance premiums (code DD in box 12), 401(k) contributions (code D in box 12), HSA contributions (code W in box 12), etc. There just isn't a box 12 code for 401(a) contributions.

$25,000 for the Adjusted Gross pay sounds right, so I don't know why $30,000 appears in Box 1. 

There isn't an automatic mechanism in TurboTax to deduct this contribution from income, so perhaps you can ask the people generating the W-2s (I assume it's some software product) how to get it out of Box 1.

"I have the 401 (a) listed as NONE in my Payroll item list since it is not listed.  " What does this refer to?