This would depend on (a) whether the plan is a 401 plan or a 457 plan, and (B) whether the employee's participation in the arrangement is irrevocable for the term of employment. Any ideas on what arrangements might be available, and whether they currently provide for (or could be amended to provide for) this employee's participation? Also, you'd want to look at applicable state and local law to find out whether there are any restrictions on the types of plans that can be adopted, or the election by the employee.

Our client is a governmental entity (a city) who has recently extended an employment contract to a new city manager. In the contract they offer a "deferred compensation program annual contribution, payable in monthly installmets by the city, to a 401 or 457 type plan sponsored by an appropriate agency".

Would these contributions by the city be considered wages and subject to FICA, Medicare and not Withholding? Thanks for any guidance!

Thanks for the direction. I'll need to gather more information on my facts.