USA 457 Accounts and FICA

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Apr 24, 2015
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My neighbor works as a clerk for a local Town (governmental unit) which pays 100% of the cost of the employee's health insurance. They have a Cafeteria plan whereby you may opt out of the insurance if you are otherwise covered by your spouse. If you opt out, you can choose more life ins, dental etc or, you can have the entire amount ($12,000) deposited in a 457 deferred comp account. My neighbor tells me that the Town requires that she pay all of the FICA and Medicare on the deferred amount. Can the Town do this?
 

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