How to report distribution

[JanetM]

How to report distribution for nonqualified pension plan.

Plan is unfunded and uses ER contributions (ficticious) only. Is not deferred comp plan. EE's pay fica and medicare based on annual (fictious) contributions.

How do you report? (Plan filed as top hat plan when started)

[Mike Preston]

I think one uses a W-2, but in the case where the FICA taxes have been paid along the way (why would they do that?), not much (if any) would be subject to FICA on the W-2.

I'd be interested in Mary Kay Foss' opinion on the matter.

[JanetM]

Mike, the fica & medicare are because of the "doctrine of substantial forfeiture". I am not claiming to be expert on these plans - that is why I am asking question.

We have been reporting on 1099R - but now the question is - is this correct.

[Mike Preston]

As I said, I don't think so, although I'd be interested to know what others have as opinions.

Yes, I understand that having the benefits not subject to a substantial risk of forfeiture is one thing that can lead to current FICA taxation. Most of these types of plans that I have dealt with over the years have delayed the payment of FICA taxes under the rules of 3121(v) and the regs thereunder. Of course, that is a bit easier to accomplish in deferred compensation plans that are defined benefit in nature.

[mbozek]

Nonqualified deferred comp is still comp and is reported on a w-2. Under IRC 3121(v) The fica taxes are due at the later of the date the services are performed or the date there is no substantial risk of forfeiture. If the comp is vested in the year the services are performed then there is no FICA tax on the distribution. 1099 income is reserved for amounts paid to non employees which is not wages subject to FICA tax, e.g., payments to independent contractors, distribuations from IRAs and qualfied plans, etc.