ESOP distribution and Social Security Earnings Record

[Guest susangrant]

It's assumed that everyone knows the answer to this question..I don't... and neither does the ESOP Plan Administrator .

I terminated my employment due to illness in 1990, although Social Security did not estabilsh my date of disability until 1996...so when I received early distribution(in 3 installments of $10,000.00 1991, 1992 &1993) I paid the 10% penalty plus state and federal taxes.

Social Security added 1991 to my Social Security Earnings Record, but are now requesting W-2's for the other two years. All I received was 1099R's with no indication of FICA taxes being withheld or paid.

Did Social Security make a mistake?

I accepted a lower wage because of ESOP and free medical benefits not knowing that this deferred income may not be eligible to be added to my Social Security earnings...other employees don't have a clue about this either so it is important to know for the future planning of retirement.

Your answer to my question is very important to me...I am disabled and poor and cannot afford a Tax Expert and I have got to get this straightened out with Social Security...they keep writing to me, but I cannot provided them with documents that don't exist.. and they seem to know less about ESOP than I do.

Please answer to the best of your ability and I thank you so much.

[QDROphile]

Most references to "ESOP" mean a plan that is a qualified retirement plan, and your indirect description fits. Sometimes people use the term "ESOP" to mean something else.

Contributions to a qualified retirement plan for your benefit and payment to you from a qualified retirement plan are not treated as wages for FICA (Social Security) purposes. Section 3121(a)(5)(A) of the Internal Revenue Code.

The inclusion of the ESOP distributions in your income for income tax purposes is a matter separate from FICA taxation and Social Security payments.

This goes beyond your question, but the elective deferral amounts under a 401(k) plan are included in wages for FICA purposes even though they are not included in income for income tax purposes in the year of the deferral.

[Guest susangrant]

Thank you so much for your time and expertise...Unfortunately for me this means I am stuck on SSI for the duration...SSA took 6 years to process my disability claim saying that my Social Security Disability Benefits expired 12-31-95...I worked full-time from the age of 15 thru 37...it just doesn't seem fair...and I truly believe they do these things intentionally..Oh well

thanks a bunch...Sue