Does your contributions come out of your gross pay or your gross pay AFTER pre-tax health insurance premiums are deducted? | 401k Questions

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Asked 7/29/2010

Does your contributions come out of your gross pay or your gross pay AFTER pre-tax health insurance premiums are deducted?

I have my gross salary pay and then my insurance premiums are deducted. After they deduct the health insurance, they THEN deduct my 6% contributions. Is that correct? Shouldn't the 401K contributions be on my gross pay, not gross pay after insurance?

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Answer 1/2 - Submitted 7/29/2010

Pre-tax health insurance isn't taxable income, not even for Social Security purposes (it isn't included in box 3 of the W-2), and retirement contributions are calculated on the SS earnings that you have.

This is true for 401(k) plans as well as the various plans a self-employed person can open.

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Answer 2/2 - Submitted 11/4/2010

Contrary to the previous response, 401K contributions are normally calculated on gross pay, not gross taxable income, unless the 401K plan itself specifically states otherwise. See IRS publication 525 and/or 560

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