FICA Tax on Nonqualified Plan Benefits

[Guest REG]

Hopefully this question is not too overly simple for this forum. I'm dealing with a straight formula defined benefit plan. I am calculating the FICA tax amount due for an executive who terminated on 12/31/2001 and retired on 01/01/2002. I understand that I must calculate the PV of his restoration plan benefit and calculate the FICA HI 1.45% tax on the entire amount. Assuming that he received a bonus in March of 2002 (which required a benefit true up), and nothing has been done until now to calculate his FICA tax liability, which year do I base the 6.2% OASDI tax liability (assuming that his earnings reached the SS wage base in 2001, thus no 6.2% tax, or, in 2002 when his earnings have not reached the SS wage base). And although this is probably a mute issue, when technically should this tax have been paid? Have I completely missed the boat on this?

[mbozek]

Under IRC 3121(v) nonqualified deferred compensation is generally includible as wages for FICA purposes in the later of the year that the services are performed or the deferred comp is vested, although there are special rules under reg 1.3121(v)(2). You need to review the plan document to determine when the bonus is vested under the regs. There are IRS regs under 1. 3121(v)(2) that provide alternatives for the timing of FICA taxation of certain nonqual. benefits when the deferred amount cannot be calculated by the end of a year. The tax is due when the amount is included as wages.