Retirement Deferrals and Match, Computed Correctly
401(k) deferrals withhold as a percent of gross, defer federal tax while staying FICA-taxable, and drive an employer match capped at a configurable percent of gross.
How 401(k) deferrals work
A 401(k) elective deferral is withheld as a percentage of gross pay and follows IRC 402(g) treatment: it defers federal income tax (and typically state) but remains subject to Social Security and Medicare. Fintra encodes that exact treatment so Box 1 drops while Box 3 and Box 5 don’t.
Deferral amount
deferral = round(gross × percent ÷ 100)
The retirement deduction is a percent of gross, rounded to cents once. It reduces federal-taxable and state-taxable wages but not FICA/FUTA wages.
Employer match
| Input | Value |
|---|---|
| Gross this period | $5,000 |
| Employee deferral (6%) | $300 |
| Employer match (100% of deferral) | $300 |
| Cap (4% of gross = $200) | Match limited to $200 |
Year-end treatment
What deferrals do to the W-2
- Reduce Box 1 (federal-taxable wages)
- Appear in Box 12 code D as elective deferrals
- Do NOT reduce Box 3 (Social Security) or Box 5 (Medicare) wages
- Employer match is tracked for reporting, not on the employee W-2 as income
Inside Fintra
The retirement-plans report summarizes deferrals and match across the org, and deferrals become deduction liabilities in the remittance rollup for the plan provider.
Frequently asked questions
Is a 401(k) deferral pre-tax for FICA?
No. Elective 401(k) deferrals defer federal income tax (IRC 402(g)) but remain subject to Social Security and Medicare, so they reduce Box 1 but not Box 3 or Box 5. Fintra applies this automatically.
How is the employer match calculated?
As a percentage of the employee’s deferral, optionally capped at a percent-of-gross limit. The match is an employer contribution tracked for reporting and doesn’t reduce employee net.
How is the deferral amount computed?
As a percent of gross pay for the period, rounded to cents once, reducing federal-taxable and state-taxable wages.
Where do deferrals show on the W-2?
In Box 12 code D, with the reduction reflected in Box 1 while Boxes 3 and 5 stay at the full FICA wage.
Stay in the loop
One practical finance briefing a week - new guides, checklists, and benchmarks.
Retirement deferrals, done right
Withhold 401(k) deferrals and compute a capped employer match automatically.
Talk to us