irsiscrazy

Supplemental Executive Retirement Plan IRS year-end reporting

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I have a client who has a defined benefit Supplemental Executive Retirement Plan.  The question is: what IRS reporting form should payments under this Plan be reported on (W-2, 1099-R, 1099-Misc)?  Here are the pertinent facts:

  • This is a non-qualified Supplemental Executive Retirement Plan aka, SERP
  • The Plan is unfunded
  • The covered executives made no contribution to the Plan: IT IS NOT A NQDC!
  • The defined benefits are computed based on years-of-service combined with a targeted percentage of final average compensation.
  • The benefits are paid out of general company funds on a monthly basis
  • There is NO SURVIVOR BENERFIT
  • There is a very strict anti-alienation clause
  • There is no option to take a lump-sum payment

Given these parameters, what year-end IRS form should these payments be reported on?  Specific cites to IRS rules and regulation would be most appreciated.

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On the assumption that these benefits were earned by participants in their capacities as W-2 employees, the payments are all reportable on Form W-2 and subject to FIT withholding and other applicable tax withholdings.  Note that per IRC Section 3121(v) the FICA/Medicare tax liabilities accrue and are due and the employee share subject to withholding at the time of vesting, or if later when the present value of the benefit becomes determinable, rather than only as and when payments are made.  If the payor is just starting to think about all this stuff now, after payments have commenced, it needs to take two aspirin and call the doctor in the morning. 

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Semantics, but a SERP is a form of a non-qualified deferred compensation plan.  You don't need voluntary deferrals or account balances, so the language in the 1099/W-2 instructions still apply.  Nothing to add to jpod's fine response, including the aspirin part.

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Note that in addition to above (all of which I agree with), you need to check whether state tax rules conform to federal, e.g. for SUI.

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