Non-Qualified Deferred Comp plan and distribution rules

[Rai401k]

Distribution from a NQDC plan for active employee. The document states that an employee can take a distribution from the plan upon emergency if approved by the employer's committee.

How are distributions taxed from a NQDC plan?

Do we withhold 20%? I know that there's no 10% withholding even if under 59 1/2.

There's some places that state it's done via W-2 if the person is an employee? Not 1099.

What if they are terminated is it true that we have to report it on the

1099 Misc. (Is there 20% wh though?)

[QDROphile]

W-2; 20% mandatory withholding does not apply; other withholding rules apply. If you are asking these questions I hope the plan is getting advice about eligibility for the distribution.

[SeanTankarian]

Hello Rai...457 NQDC distributions are reported on the employer's 1099. There is no 20% mandatory withholding, but the plan document may have a 10% default. The employee can opt out of withholding if he/she wishes. Distributions are treated as ordinary income with no penalty and amount distributed doesn't have to be paid back. Does this help any?

Question for the administrator...can we post relevant links when answering questions?

[QDROphile]

From instructions to Form 1099-R:

Nonqualified plans. Report any reportable distributions from commercial annuities. Report distributions to employee plan participants from section 409A nonqualified deferred compensation plans (including nongovernmental section 457(b) plans) on Form W-2, not on Form 1099-R; for nonemployees, these payments are reportable on Form 1099-MISC. Also, report distributions to beneficiaries of deceased plan participants on Form 1099-MISC.