Tax Withholding on Nonqualified Deferred Comp

[Guest koolkidd]

My company has an upcoming change of control which will require us to distribute the assets accumulated under our deferred compensation plans. What federal and state tax withholding should be applied to this money?

[Guest Lawrence_Groves]

It will depend on the funding vehicle used to indirectly fund the Deferred Comp. The benefit payments to the participants are taxed as ordinary income. If you are using life insurance or deferred annuities, the surrender will be taxed to the company as the owner of the policies, etc. If you used mutual funds, then the company will be taxed on the gain

[Harwood]

Payments from non-qualified plans are W-2 income.

Consult your payroll department on withholding issues.

[Guest Harry O]

. . . and don't forget that if any of the payments are excess parachute payments under Section 280G, you will probably need to withhold the 20% excise tax under Section 4999.

[Guest koolkidd]

Thanks All.