Most pre-tax benefits offered within a cafeteria plan are excluded from Old-Age, Survivors and Disability Insurance -- or OASDI -- taxes. This rule does not apply to 401(k) contributions, however, regardless of whether you pay with pre-tax or after-tax money. OASDI tax is also called Social Security tax.
In 2012, your 401(k) contributions were subject to OASDI tax of 4.2 percent, up to the annual wage base of $110,100. In 2013, the rate increased to 6.2 percent, up to $113,700 in wages. Unless you earn at least the annual wage limit -- at which point your OASDI withholding should stop -- your employer must withhold OASDI tax from your 401(k) contributions. To calculate the tax on your contributions, include the 401(k) amount in your gross wages or salary for the pay period. Then, multiply your total gross pay by the tax rate.
Pre-tax and After-tax
Depending on the type of 401(k) plan, you may pay with pre-tax or after-tax money. Traditional, safe harbor and SIMPLE 401(k) plans are funded with pre-tax dollars, and Roth 401(k) plans are after-tax. "Pre-tax" means your contributions are exempt from federal, and, in most cases, state income tax, but not OASDI tax. "After-tax" means that your contributions are not excluded from federal, and, in most cases, state income tax, and OASDI tax.
In 2013, you may contribute up to $17,500 to a traditional, Roth or safe harbor 401(k) account and up to $12,000 to a SIMPLE 401(k) account. If you are 50 or over, you may contribute a catch-up amount of up to $5,500 to a traditional, safe harbor or Roth account and up to $2,500 to a SIMPLE 401(k). All of these amounts are subject to OASDI tax, provided your wages do not exceed the annual wage limit.
Impact on W-2
Your W-2 shows your taxable compensation for the tax year. Box 5 of the form includes your Social Security wages that were subject to OASDI tax, including your 401(k) contributions; the total amount should not exceed the annual wage base for the tax. Box 4 shows the total amount of OASDI tax withheld from the amount in Box 3. As of 2013, the amount in Box 3 should not exceed $7,049.40, which is $113,700 multiplied by 6.2 percent.
- IRS.gov: Topic 424 - 401(k) Plans
- Social Security Administration: OASDI and SSI Program Rates and Limits, 2013
- Social Security Administration: 2012 Social Security Tax Rate and Maximum Taxable Earnings
- IRS.gov: 401(k) Resource Guide - Plan Participants - Limitation on Elective Deferrals
- IRS.gov: W-2 Form