Revenue published eBrief No. 36/11 which clarifies the Income Tax, PRSI and USC treatment of employer contributions to an employee's Personal Retirement Savings Account (PRSA).

An employer contribution to an employee's PRSA is treated as a taxable BIK for the employee. However, for the purposes of obtaining tax relief on pension contributions, the employee rather than the employer is deemed to have made such a contribution to the pension fund-section 787E(2) TCA 1997. Where the employer contribution does not exceed certain limits based on the age of the employee the effect of this provision is that the tax relief on the contribution negates the taxable BIK on the benefit provided. An employer is not obliged to operate PAYE on contributions to a PRSA for an employee as provided for by section 985A TCA 1997.

eBrief No. 36/11 confirms that although employer PRSA contributions are a taxable BIK, as they are not taxed under PAYE, they are also not chargeable to PRSI (both employer and employee share). Where employer PRSA contributions have been put through payroll and PRSI has been deducted, employers should make the necessary adjustment to payroll.

Members are also reminded that the USC is chargeable on the taxable BIK of an employer contribution to an employee's PRSA since 1 January 2011.

Full details on the Income Tax Treatment of employer contributions to an employee's PRSA, and the BIK, PRSI charges is set out in Revenue's eBrief No. 36/11 which is reproduced on here.