Am I lowering my future Social Security benefit by contributing to a 401(k) plan, FSA or HSA.

401(k) contributions are pre-tax for income tax purposes but they are still taxable for Social Security and Medicare payroll taxes, so no impact there.

However, there are employee benefit programs that are pre-tax or tax-deductible that will lower your future Social Security benefit.

If you pay your share of health insurance premiums on a pre-tax basis under a Section 125 plan (most large employers have such a plan), if you have a Flexible Spending Account (FSA) or a Health Savings Account (HSA) contributions to the plans are not subject to Social Security taxes.

That means if your income in below the maximum taxable wage for Social Security, you will lower your future Social Security benefit.

It’s very hard to predict how much of an impact there will be and it will vary by person. In most cases the impact is small and the near-term tax advantages out weigh the future reduction. Here is how one employer plan describes the impact.

If your annual pay is less than the Social Security Taxable Wage Base, paying your portion of the premiums with before-tax dollars will reduce your Social Security taxes slightly. This may result in a small reduction in your future Social Security benefits – less than 1% in most cases.

However, a word of caution. With the growth of high-deductible health plans and Health Savings Accounts and with ever rising employee premium payroll deductions, the portion of a workers pay not subject to FICA taxes is also growing and not proportionally with earnings.

Generally, what a worker pays for health insurance is not based on their income. So, the higher the premium, (or HSA contribution) the greater portion of wages are tax-free thus in some cases causing a greater reduction in Social Security benefits in the future.

Just something to think about … and perhaps ask your employer about.