May an employee defer all of his or her paycheck to 401(k)?

Author: Ryan F. Donovan

No. Since 401(k) is not exempt from Social Security and Medicare, the employee must pay those taxes out of his or her paycheck before 401(k) is withheld. Also note that many payroll check calculation systems specifically calculate all taxes before addressing voluntary deductions, so federal, state and local income taxes may come out as well, even if that is not the employee's or the employer's intent.