Tax Reporting

[ERISA-Bubs]

I understand the general rules for reporting nonqualified deferred compensation ("NQDC"):

1) when vested, included in social security / medicare (boxes 3 and 5 on W-2)

2) when distributed, include in income (boxes 1 and 11 on W-2)

How do we treat earnings? The only guidance I can find says that deferred compensation includes earnings. Does that mean I have to report earnings every year in social secuirity and medicare so long as they are vested?

[Guest LeeNunn]

See Withholding and Reporting for Nonqualified Deferred Compensation and Executive Life, Journal of Deferred Compensation, December 15, 2010

Designed for HR professionals and nonqualified plan administrators, this guide identifies the correct form for reporting nonqualified benefits and explains the important boxes on the form. In addition, the guide explains important FICA tax concepts and gross-up arrangements. Finally, the guide applies these concepts to specific transactions unique to nonqualified deferred compensation arrangements.

Send me an email and I'll send you a copy. Lee.Nunn@aon.com