Employee contributions are excluded from wages or salaries. They in fact are decreasing your reportable income.
Wrong, but you've hit on the source of all the confusion: the BEA's methodology isn't the same as the IRS's. The IRS
excludes some things from adjusted gross income (AGI) that the BEA
includes in income.
This is explained in "Comparison of BEA Estimates of Personal Income and IRS Estimates of Adjusted Gross Income":
Employee contributions to thrift savings plans, primarily 401(k) plans, are included in personal income as wage and salary disbursements but are excluded from AGI."http://www.bea.gov/bea/articles/national/NIPAREL/2000/0200agi.pdf
You are talking to a now retired financial executive who had expertise in establishing pension plans.
Don't get so wrapped up in the minutae of BEA vs AGI.
If you are covered by a 401K plan, just look at your paycheck.
Your contributions are not included in your earnigs.
Sample: A worker makes $50 000 per annum and contributes $ 5000 into a 401K, his W2 will show earnings of $ 45 000.
It's actually very simple.