terminating SERP

[K2retire]

I don't typically work on non-qualified plans, so I'm feeling somewhat like a fish out of water.

A client who has had a SERP for many years has decided to terminate it and pay out all of the participants. The record keeper has indicated that they can either pay the funds to the employer to distribute, after appropriate withholding, or they can handle the withholding and make the distributions directly to the participants.

A question has arisen about FICA and Medicare tax withholding. The record keeper is researching whether or not they can handle those. If they decide they can, the employer wants to know how the employer share is handled.

What is the typical solution to this issue?

[Mark Whitelaw]

My understanding is distributions go through the employer's payroll system as these are w-2 wages.

[EBECatty]

I've usually seen SERP payments held in trust run back through the employer's payroll to make sure withholding, W-2 reporting, etc. is all coordinated.