Distribution from Top-Hat Plan - needs a Form 1099 or a Form W-2?

[Guest]

Need a little more information but generally a distribution from an unfunded deferred compensation plan is reported on a Form W-2 (assuming we are talking about an employee or former employee and not an independent contractor).

The payment to an employee is subject to the usual wage withholding rules and may have been subject to FICA tax in an earlier year.

[k man]

A participant is taking a distribution from a Top-Hat Plan. Does he receive a 1099 or W-2 for the distribution?

[pjkoehler]

Distributions from nonqualified deferred comp plans to employees or former employees are treated as wages and reported on a W-2. If the employee is receiving a W-2 for other wages, tips and compensation during the year, then the plan distribution should be added to this. Assuming that the deferrals were subject to FICA taxation in the year of the deferral, neither the deferral nor the investment earnings component is subject to FICA on distribution, so the amount of the distribution may be excluded from Social Security Wages and Medicare Wages. On the other hand, if the deferrals were not subject to FICA on the way in, the deferrals plus the investment earnings are subject to FICA on the way out.