A section 414(h) plan refers to a type of tax-deferred government retirement plan. Government employers with 414(h) plans mandate employee contributions, which the employer then “picks up.” The employer does not deduct the contribution from the employee’s wages, pays the contribution and excludes it from the employee’s taxable income. By contributing to a Section 414(h) retirement plan, you will automatically reduce the amount of income tax you currently pay. The amount you contribute is not reported as taxable income on your W-2 to the IRS. Of course, you can’t defer taxes forever. When you begin taking money from your plan, your withdrawals will be subject to ordinary federal income taxes. Although not subject to federal tax, a NY school system 414 (h) is subject to NY state tax.
Section 414(h) retirement plan contributions are commonly reported in Box 14. Employers may use Box 14 to report certain employee benefits or deductions for informational purposes only. Depending on the nature of the item, an employee may utilize this information in his tax preparation.