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457b Withdrawl

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I have a 457b with my former employer. I am 41 years old. I want to liquidate the account. I understand that I have to pay income tax on the balance. But do I have to pay Social Security taxes on the funds as well? If so, would I have to pay these taxes if I was retirement age?


All contributions were made in 2007 and I earned well above the maximum s.s. tax limit, if this matters.


The HR department is clueless about this account because it is a new benefit and only a few emplyees are enrolled and I think this is the first time they have had to process a pre-retirement withdrawl.


Thanks for your help.


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If your employer is (was) subject to FICA taxes for wages paid to employees, then any contribution made to the 457(b) plan is (were) also subject to the same employee and employer FICA tax. Note: some employers are not subject to FICA and their employee wages are not counted for social security purposes.


So if your normal wages from this employer were subject to FICA, then that means the contibutions made to the 457(b) plan were subject to FICA at the time of the contribution. That also means the FICA tax should have applied no matter how the money got into the plan - whether it was a deferral from your salary or as an employer contribution - it's is all subject to FICA going in.


None of it is subject to FICA tax coming out, except for some very unusual situations. For instance, suppose the employer failed to pay FICA tax to the contributions going in - then, (this needs verification), the distributions may be subject to FIC tax (including the earnings on the account). If you think that is your situation, please reply and we can look into this further to verify.


Also, let us know if your employer was a government, or if they were a nonprofit company.

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