Tax Rate for Distributions to Beneficiaries

[ERISA-Bubs]

There has been plenty of discussion on these boards regarding reporting of distributions of nonqualified deferred compensation to beneficiaries after death of the participant.

In short, if any of the deferrals vest in the year of death, FICA is reported on the employee's final W-2 and a Form 1099-Misc is issued to the beneficiary. If FICA has already been paid, you just need the Form 1099-Misc.

The question I have is what tax rate do we use? Do we use the employee's tax rate, or the beneficiaries tax rate? What if it is paid in installments beginning in the year of death--employee's rate for the installment that year and beneficiaries rate for payments in subsequent years?

I would appreciate any advice and any citations you have available!