W-2 Compensation

[Guest Dumb & Dumber]

Here is the situation. We have an owner of a corporation who unfortunately passed away. This owner always received a bonus at the end of each year, but this year the corporation was trying to process the bonus as soon as possible because of the health situation. However the bonus did not get paid prior to the passing of the owner. The plan document defines compensation as Form W-2 Compensation. From the initial research that has been done, it appears the compensation will be listed on the 1099-Misc and will be issued in the name of the deceased employees legal representative. But the compensation will be listed on the owner’s W-2 for FICA and FUTA but will not be listed on box 1 of W-2. The question is whether or not the compensation is counted for retirement plan purposes since it is not on box 1 but is on other boxes on the W-2.

[Andy the Actuary]

Would suggest obtain an another payroll accounting opinion.

Suppose we pay someone biweekly, the pay period ends on 7/15, pay checks are distributed on 7/20, and employee dies on 7/16. Would you pay this person on a 1099-Misc? Likewise, (assuming not too much daylight passed between date of death and date of payment), the bonus is attributable to a period of work performed and it would seem should be W-2 income.

[masteff]

See my comment in your other thread here: http://benefitslink.com/boards/index.php?s...c=49272&hl=

Andy, one key element is "issued in the name of the deceased employees legal representative".