Under a cafeteria plan, pretax contributions to a 401(k) are subject to which federal taxes?

Under a cafeteria plan, pretax contributions to a 401(k) are subject to which federal taxes?

• A. FICA, FUTA and FIT
• B. FICA and FUTA
• C. FICA
• D. None

Answer: (B)

Under a cafeteria plan, pretax contributions to a 401(k) are subject to FICA (Federal Insurance Contributions Act) and FUTA (Federal Unemployment Tax Act) taxes. This means that earnings contributed to a 401(k) plan on a pretax basis reduce an employee's taxable income for federal income tax purposes, but they do not reduce earnings subject to FICA taxes, which fund Social Security and Medicare. FICA taxes are deducted from an employee's paycheck based on gross earnings before the pretax contributions are applied. Additionally, FUTA applies to employers but is relevant as it is calculated on the total remuneration paid to employees, including any pretax contributions. Federal income tax (FIT) is not applicable to these contributions as these pretax amounts are already excluded when determining the employee's taxable income for federal income tax purposes. Therefore, FICA and FUTA are the correct federal taxes applicable to pretax contributions to a 401(k) under a cafeteria plan.

Under a cafeteria plan, pretax contributions to a 401(k) are subject to FICA (Federal Insurance Contributions Act) and FUTA (Federal Unemployment Tax Act) taxes. This means that earnings contributed to a 401(k) plan on a pretax basis reduce an employee's taxable income for federal income tax purposes, but they do not reduce earnings subject to FICA taxes, which fund Social Security and Medicare.

FICA taxes are deducted from an employee's paycheck based on gross earnings before the pretax contributions are applied. Additionally, FUTA applies to employers but is relevant as it is calculated on the total remuneration paid to employees, including any pretax contributions.

Federal income tax (FIT) is not applicable to these contributions as these pretax amounts are already excluded when determining the employee's taxable income for federal income tax purposes. Therefore, FICA and FUTA are the correct federal taxes applicable to pretax contributions to a 401(k) under a cafeteria plan.