The Deferred Compensation Plan

DCP in Lieu of FICA

You cannot contribute to both the Deferred Compensation Plan and FICA unless you contribute less than 7.5% to the Plan or are a member of a pension system or the Voluntary Defined Contribution Program (VDC).

If you are contributing 7.5% or more of your pay to either the 457 or 401(k) and you are not a member of a pension system or the Voluntary Defined Contribution Program (VDC), you will not pay Social Security (FICA) tax. Please be advised, however, the timing, as to when the FICA payroll tax deduction will cease, depends on when during your City service you began contributing 7.5% of your total annual pay to either the 457 plan or 401(k) plan. If you are a newly hired City employee and contribute to the 457 plan or 401(k) plan with a deferral equal to or greater than 7.5% during the first 30 days of City employment, you are entitled to a refund of moneys deducted for Social Security (but not Medicare) from the date of hire until the DCP contributions start. 

Important Note: An employee participating in DCP in lieu of FICA and participating in the Health Benefits Buy-Out Waiver Program (taxable income) or has enrolled a domestic partner as a dependent in the City’s Health Benefits Program (imputed income), may need to increase his/her salary deferral percentage to an amount higher than 7.5% of annual salary in order to account for the increase in income. If the 7.5% of total salary income requirement is not met, the participant who is enrolled in DCP may be subject to FICA taxes.

Please further note: You must contribute at least 7.5% to a single plan; FICA deductions will not cease if you contribute, for example, 4% to one plan and 3.5% to the other. In the 457 and 401(k) plan, the 7.5% deferral amount must be either before-tax or Roth (after-tax) but cannot be a combination of both. Only certain titles from NYC Health + Hospitals (H+H) are eligible for this provision. NYC H+H employees must contact NYC H+H payroll for eligibility information.

IMPORTANT : Employees should be aware that not paying FICA tax could result in an ineligibility or reduction in Social Security disability benefits. Employees should visit the Social Security Administration’s Web site at www.ssa.gov for more information on qualifying for Social Security benefits.

Still Have Questions?

If you still have questions, or would like more information about the Plan, register to attend the DCP Basics webinar or call the Plan's Client Service Department at 212.306.7760.