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EBECatty

Reporting of previously taxed 457(f) distributions

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Cross-posting from 457 plans:

Quick question on reporting 457(f) distributions. Say you have a 457(f) plan that vests in a fixed amount (say $500,000) in one year but is paid in installments (say 5 years at $100,000 starting the year after vesting).

Setting aside for the moment the issue of present value, the employer would report all $500,000 as taxable wages on a W-2 in the first year. Later distributions would be subject to tax under section 72, which would require no further taxation upon distribution.

In the installment years, do the $100,000 non-taxable distributions get reported anywhere?

Section 4.72.19.27 of the IRM says the following, but it's not clear what the employer reporting requirements are (if any):

For any amounts previously taxed, but not distributed from a 457(b) or 457(f) plan, the participant will have "basis" on that amount and is not required to pay tax again at the time of distribution. It is the individual’s responsibility to report this on Form 1040 for the year distributed. See IRC 72 for additional guidance on basis. 

Thanks in advance.

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If the facts are as you state them (i.e., no interest or earnings on the unpaid principal), I don't know why there should be any W-2 or 1040 reporting for any years following the vesting year.  P.s., if no amounts are actually paid contemporaneous with vesting, or by the end of the calendar year following vesting, FICA/Medicare must nonetheless be paid on the $500k, both the employee and employer components.   

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