Can the employer add income to the W-2 the employee share of distribution and keep the all the money in his trust account and payout the balance over 60 months? Also could I deduct a long term loss if the balance is reduced by not being 100% vested? Example balance was $75,000 and 20,000 was vested amount according to plan.

I do not understand the question.

To me a "KeySOP" is a nonqualified option product sold by Deloitte & Touche that has nothing to do with qualified plans. If you exercised a KeySOP, you have W-2 income.