RETIREMENT SOLUTIONS
FICA Alternative (OBRA Plans)
Cost savings and retirement benefits for part-time employees.
A FICA Alternative plan is a retirement plan for seasonal, part-time, and temporary governmental and school district employees. Employers may avoid up to the matching 6.2% Social Security contribution, replacing it with an impactful benefit for employees.
FICA is a U.S. federal payroll tax. FICA is another name for Social Security payments.
This plan allows you to substitute Social Security payments with a private investment plan for your part-time, temporary, and seasonal employees. Contributions to the plan are deducted from employees’ wages. They are income tax-deferred and invested in accordance with employees’ direction and objectives.
Benefits to you:
Like Special Pay Plans, you save Social Security taxes — but Medicare taxes are still required.
Benefits to your employees:
Employees in a FICA Alternative (OBRA plan) can choose from a wide variety of savings and investment options, and their accounts grow income tax deferred. This means greater control of retirement funds upon termination, death, disability or normal retirement age. 7.5% of employee wages are contributed on a pre-tax basis.
Meet John
John is a part-time employee for his local school district. Because his school district has a Daybright FICA Alternative Plan, he now has a contribution going into his retirement plan in his name with no impact to his take-home pay, a benefit he would not have had otherwise. Here is how the plan works:
Without Daybright’s FICA Alternative Plan
Without Daybright’s FICA Alternative Plan
Takeaway: John’s take home pay increases and he’s saving for his retirement!