eligible gov't 457 plans and FICA

[Guest ak]

Under EGTRRA amounts under an eligible 457 plan of a state or local government are includible in income when paid. It also provides that the definition of "wages" for withholding purposes does not include payments under or to such plans. I take all this to mean that payments under such plans are now subject, for income tax purposes, to withholding in the same fashion as 401(a) qualified plans and reporting under Form 1099-R rather than W-2. Is this correct?

Also, I didn't notice any changes in the definition of "wages" for FICA purposes.

Presumably then, payments from such 457 plans would still be subject to FICA taxes at the applicable time and these amounts would still have to be reported on a W-2 for FICA purposes. Is this correct?

Bottom line, under such 457 plans, for income tax purposes a payment would be withheld and reported (Form 1099-R, no W-2) in the same fashion as a 401(a) payment. However, such payment would still be subject to FICA taxes and related reporting would be done on W-2.

Thanks for any comments/guidance.

[Appleby]

The new withholding and reporting requirements applicable to eligible 457 plans as states in IRS Notice 2000-38 [2000-33 IRB 174] still applies.

Check http://ftp.fedworld.gov/pub/irs-drop/n-00-38.pdf