Basics of a FICA Alternative Plan

A FICA Alternative Plan allows qualifying governmental employers the ability to set-up a Social Security Alternative plan for their part-time, seasonal or temporary employees (PST).  Qualifying governmental employers can save their portion of social security (6.2%) on part-time, seasonal or temporary employee wages by establishing a FICA Alternative Retirement Plan.  These plans are an authorized alternative to Social Security under Internal Revenue Code Section 3121.

A FICA Alternative Plan can provide a solution that aids both the employee and the qualifying governmental employer.  The employee makes a 7.5% pre-tax contribution into the FICA Alternative Retirement Plan instead of a 6.2% after-tax contribution to social security so there is minimal impact on take-home pay.  At termination of employment, in the event of disability or death or at normal retirement age, the employee has the ability to access their monies in the FICA Alternative Retirement plan. 

The qualifying governmental employer benefits from the FICA Alternative Plan because the law requires a 7.5% contribution from the employee which is placed in an account in the employee’s name.  The qualifying governmental employer saves the 6.2% it would have paid into social security on the employee’s behalf.