Question regarding FAFSA and 414(H) pensions

<p>We're in the process of working through the FAFSA and CSS paperwork for our first child and have a question regarding a 414(h) pension (government employee mandatory pension contributions) my wife has. In reading the information on FAFSA, it identifies numerous pensions which must be claimed as parental assets and/or the past years (pre-tax) pension payroll deductions must be written back into the Adjusted Gross Income (AGI). We've not read anything about 414(h) pensions and how they are considered for FAFSA purposes. In speaking to someone at the FAFSA hotline, we were still unsure. They were not familiar with the 414(h) and didn't find anything specific to it, but assumed that because it is taken out of the paycheck, pre-taxed, that it would be counted as income and should be computed back into our AGI, but that the balance of the 414(h) pension should not be recorded as an asset (we were fairly sure about that part to begin with). We were wondering if anyone has had to figure a 414(h) pension into their FAFSA and what they found to be the case with how it is figured. We don't want to make any mistakes, this first time around. Thanks for any help offered.</p>

<p>In doing more reading, we're still not certain that this pension is treated as others. What is different about this pension is that it is a mandatory deduction from pay, not anything arranged by us. It is determined by the employer how much is deducted, and also, we can not take it out, we can only borrow half of the value, and must pay back with interest. One post we read regarding pensions here on CC stated the following.......</p>

<p>"What's already in the retirement fund is protected, but the expectation is that parents will put current income toward college ... so the untaxed income that is diverted to retirement during college years gets counted as income that could be going toward tuition." </p>

<p>In our case, we're not the ones diverting the money (our employer is) and as I said, we can not just take it out. We actually have to borrow our own money and pay back with interest. Has anyone had to deal with this type of pension before, for FAFSA purposes? Thanks</p>

<p>Typical pension program contribution are not added back into the available income since those contributions are not optional for the employee. I recommend ignoring the 414 contributions.</p>

<p>Thanks for your input, scottaa.</p>

<p>macnell: I have a 414(h) pension also. I just submitted a CSS PROFILE and did not include anything about it on the form, other to answer "yes" to question whether I have a state-sponsored pension. I am starting the FAFSA and anticipate doing the same. The reasons are what you have identified: our contributions are mandatory, and it's a defined benefit plan we do not know the value of (other than our contributions). I am relying on these facts and a few other things. The PROFILE gives examples of plans you are supposed to include info about and the 414(h) is not mentioned, and I posted a question about this type of pension the other week and got responses that supported my understanding. Finally, when my son was in middle school at his private school and I submitted a financial aid application, the contributions to the pension were questioned and they were about to be treated like discretionary 401k contributions. My HR person at work confirmed the mandatory nature of the contributions, the school (and the SSS, which processed its applications) accepted that, and I never had the issue raised again.</p>

<p>The FAFSA worksheet specifically states that codes D, E, F, G, H, and S must be reported. I found a FAFSA verification form (audit) on the web that spells this out as well. What makes the issue somewhat confusing is that my W-2 does not have room in boxes 12 a through 12d, so it places the 414(H) in Box 14 under OTHER. It appears that if there is a difference in amounts between Box 1 and Box 2 on the W-2, then you have untaxed income. Since one could opt to follow the advice given in either this or the previous responses to this question, I would caution readers to question the advice found on this and other discussion boards on the web and always seek out verification from official sources.</p>

<p>Mandatory payments to pensions do NOT have to be reported on the FAFSA.</p>

<p>Kelsmom- is this true for the CSS as well? (that mandatory pension payments are not included) I didn't have any trouble with the FAFSA but I feel like I need a Master's Degree to fill out this CSS.</p>

<p>I don't know for sure about CSS - hated filling it out when I had to! :) I don't think you have to, though, since it's mandatory ... it's not like you have a choice the way you do the 401k and 403b payments.</p>