414(h) Pension Contributions and NYC Deferred Comp (457)
A 414(h) pension contribution comes out of your pay before federal income tax, but New York State and New York City still tax it. A pre-tax 457 deferral through the NYC Deferred Compensation Plan is free of all three income taxes when you make it. Neither lowers Social Security or Medicare.
On a salary of $85,000 paid every two weeks, putting 5% of pay into a 414(h) pension saves $35.97 of tax a paycheck; the same 5% in a 457 saves $51.75.
414(h) vs 457 at $85,000 a year
| Per paycheck | 5% to a 414(h) pension | 5% to a 457 plan | Neither |
|---|---|---|---|
| Gross pay | $3,269.23 | $3,269.23 | $3,269.23 |
| Pension or deferral | $163.46 | $163.46 | $0.00 |
| Federal income tax | $343.65 | $343.65 | $379.62 |
| Social Security | $202.69 | $202.69 | $202.69 |
| Medicare | $47.40 | $47.40 | $47.40 |
| New York State income tax | $154.82 | $145.99 | $154.82 |
| New York City income tax | $118.68 | $111.73 | $118.68 |
| Tax saved | $35.97 | $51.75 | $0.00 |
| Take-home pay | $2,238.53 | $2,254.31 | $2,366.02 |
Per biweekly paycheck for a single filer living in New York City, from our NYC paycheck calculator set to a salary of $85,000 with a 5% 414(h) pension.
How 414(h) contributions are taxed in New York
Your employer "picks up" the mandatory pension contribution under section 414(h) of the Internal Revenue Code, so it is treated as an employer contribution for federal income tax and left out of your federal taxable wages. It is still your money going to your pension, and it still counts as wages for Social Security and Medicare.
New York does not follow the federal exclusion. The contribution is added back to your income as a New York addition modification on Form IT-201, or Form IT-203 if you are a nonresident, so New York State and New York City income tax are withheld on it through the year and charged on it when you file.
On a City W-2, Box 1 federal wages are already reduced by the contribution and Box 14 shows it as IRC414H. Social Security and Medicare wages in Boxes 3 and 5 are not reduced by it, and your New York wages add the IRC414H amount back to Box 1.
414(h) vs 457: tax saved at each salary
At every salary the 457 saves more, because it also lowers New York State and City tax. At $85,000 the gap is $410.28 a year, all of it state and city tax.
| Salary | 5% to a 414(h) pension | 5% to a 457 plan | 457 saves more by |
|---|---|---|---|
| $60,000 | $360.09 | $646.61 | $286.52 |
| $85,000 | $935.21 | $1,345.49 | $410.28 |
| $110,000 | $1,209.79 | $1,830.15 | $620.36 |
| $150,000 | $1,799.98 | $2,683.46 | $883.48 |
Yearly tax saved for a single filer living in New York City, with 5% of pay in each.
414(h) pension contribution rates for NYC public jobs
The contribution is set by each pension system and plan, for employees hired in 2026. Every one of these is a 414(h) pickup, taken from pay before federal income tax.
| Job | Pension system | Employee contribution |
|---|---|---|
| NYC teacher (UFT) | Teachers' Retirement System (TRS) | 3% to 6%, by salary band |
| NYPD police officer | New York City Police Pension Fund | 4% |
| FDNY firefighter | New York City Fire Pension Fund | 5% |
| FDNY EMT and paramedic | New York City Employees' Retirement System (NYCERS) | 9.25% to 12%, by salary band |
| MTA bus operator | NYCERS for New York City Transit Authority employees; the MaBSTOA Pension Plan for MaBSTOA employees | 3% to 6%, by salary band |
| MTA conductor and train operator | New York City Employees' Retirement System (NYCERS) | 3% to 6%, by salary band |
| NYC sanitation worker (DSNY) | New York City Employees' Retirement System (NYCERS) | 4.4% |
NYC Deferred Compensation Plan: 457 and 401(k) limits for 2026
The NYC Deferred Compensation Plan, run by the city's Office of Labor Relations, has two programs: a 457 plan and a 401(k) plan, each with a pre-tax and a Roth option. Pre-tax deferrals come out before federal, New York State and New York City income tax, but not Social Security or Medicare. Roth deferrals come out after all of them, and qualified withdrawals are tax-free.
For 2026, each plan takes up to $24,500 of salary deferrals, pre-tax and Roth together, plus $8,000 more from age 50, or $11,250 at ages 60 to 63. The 457 and the 401(k) have separate limits, so a City employee can defer up to $49,000 across both.
Money in the 457 can be withdrawn without an early-withdrawal penalty once you leave City service, whatever your age. Teachers have a separate voluntary plan, the TRS Tax-Deferred Annuity, a 403(b); MTA employees have the MTA's own 457 deferred compensation plan and 401(k) Thrift Plan.