401(k) deductions from employee earnings will result in lower Federal income tax withholding for the employee.

The employee's FICA tax deduction is unaffected by 401(k). Employer taxes are unaffected by any 401(k) amounts deducted.

Cafeteria deductions from employee earnings will result in lower Federal income tax withholding for the employee. The employee's FICA tax deduction will also be lower. The employer's tax liability for FICA and FUTA will be lower, but affect on state taxes varies among states for Cafeteria plan deductions.

401(k) & Cafeteria Plans - Summary of Tax Ramifications

Item	Computation
FEDERAL INCOME TAX	Gross less 401(k) less Cafeteria (gross - 401(k) - cafeteria = taxable)
EMPLOYEE FICA	Gross - Cafeteria
EMPLOYER FICA	Gross - Cafeteria
FUTA	Gross – Cafeteria
SUTA	Gross OR Gross - Cafeteria (varies by state)
WORKER'S COMPENSATION(RATE PER HOUR)	Gross Worker's compensation (Washington State L&I) tax is computed based on hours worked rather than earnings. The quarterly report includes earnings (for reporting purposes only).
WORKERS' COMPENSATION (RATE PER $100)	Gross OR Gross - Cafeteria (varies by state) In states where the amount due is computed as a rate per $100 of earnings.