Form W-2 and 409A

[Guest andmik]

Hello:

We are working through the information required to be reported on a W-2 for the new rules under 409A.

Since the new requirements as indicated in the Instructions for Form W-2 reflect as follows: "Code Y—Deferrals under a section 409A nonqualified deferred compensation plan. Include current year deferrals under a section 409A nonqualified deferred compensation plan. Any earnings during the year on current year and prior year deferrals must also be reported here. See Nonqualified deferred compensation plans on page 6."

If I am reading this correctly, it will require a calculator to determine the earnings on both the current year deferrals and earnings on the the immediately preceding year's deferrals but not earnings on years earlier.

Is this something that anyone has actually decided can be done? Culling out only the current and one prior year's deferral earnings seem to be incredibly onerous from a recordkeeping aspect.

Any thoughts will be appreciated.

Sincerely,

Andmik

[Guest mjb]

The requirement to report all amounts of deferred comp even if not reported in income is required under 409A so that congress will know how much is being deferred. The IRS is considering some form of relief from having to report these amounts by Jan 30, 2006.

[Guest George Chimento]

<<If I am reading this correctly, it will require a calculator to determine the earnings on both the current year deferrals and earnings on the the immediately preceding year's deferrals but not earnings on years earlier. >>

It's not as bad as you think. For 2005 reporting, just report the deferrals made in calendar 2005 and earnings on them. The authority for this is Q&A 28 in Notice 2005-1. The proposed regulations recommend that you use the Notice for guidance.

George Chimento

[Guest George Chimento]

Hello:

<<We are working through the information required to be reported on a W-2 for the new rules under 409A.

Any thoughts will be appreciated>>

After responding to you, I learned that 409A disclosure reporting will not be required by IRS for 2005.

IRS has not published the Notice yet, but the draft is circulating.

On to the next project.

[Ron Snyder]

IRS Notice 2005-94, issued on December 8, 2005, suspends all reporting and wage withholding requirements (but not tax payment requirements) for 2005 with respect to salary deferrals. The Notice specifically states: "For calendar year 2005, an employer is NOT required to report deferrals for the year under a nonqualified deferred compensation plan as § 409A deferrals in box 12 of Form W-2 using code Y."

Note that under Notice 2005-94, IRS reserves the right to require employers and payers to make additional, amended filings at a later date.

[SoCalActuary]

"Current and prior year deferrals" to me means all prior years, not just the immediate prior year.

The IRS should be giving you examples of this, so the intent is clear.