Looking for a Irs Publications? Download it for free!

No risk of forfeiture. If there is no risk of forfeiture, report

Submit Form SSA-131 to the SSA office nearest your

place of business. Or, the employee can submit it to the

wage amounts deferred to a nonqualified deferred com-

SSA office handling the claim. You or the employee must

pensation or section 457 plan in box 3 (up to the wage

submit this form before the SSA can exclude the special

base maximum) and/or box 5 of Form W-2.

wage payments for purposes of the earnings test. If report-

ing on more than one employee, complete a separate

Example. Company X’s nonqualified deferred compen-

Form SSA-131 for each employee or use the paper listing

sation plan allows the deferral of up to $20,000 of em-

format (except for reporting nonqualified and section 457

ployee salaries each year. The plan has no risk of

plan deferrals and payments) in Table 5.

forfeiture. Employee A defers $20,000 to the plan from a

total salary of $200,000.

Do not report payments from nonqualified de-

ferred compensation or section 457 plans that

Form W-2 Completion

were reported in box 11 of Form W-2. Use Form

CAUTION

Box

Amount

SSA-131 if deferrals to and payments from nonqualified or

1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$200,000

section 457 plans occurred during the tax year.

3* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

106,800

5 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

200,000

Reporting Nonstatutory

*Wage base maximum for tax year 2009

(Nonqualified) Stock Options as

Special Wage Payments

Risk of forfeiture lapses before retirement. If the sub-

stantial risk of forfeiture lapses before the employee re-

A nonstatutory (nonqualified) option to purchase stock

tires, report all past contributions to the plan (or the value of

which is exercised in a year after the year in which the

the plan), including accumulated earned interest, in box 3

option was earned is a special wage payment. It should not

(up to the wage base maximum) and/or box 5 of Form W-2.

count for the social security earnings test. Nonstatutory

The accumulated deferrals are reported along with any

(nonqualified) options exercised as special wage pay-

other social security and Medicare wages earned during

ments by retired employees or employees who continue to

the year.

work while receiving social security benefits should be

Report in box 11 of Form W-2 the amount of deferrals,

reported by employers using the above reporting methods.

including any accumulated interest, that became taxable

for social security and Medicare taxes during the year (but

Nonqualified Deferred Compensation

were for prior year services) because the deferred

and Section 457 Plans

amounts were no longer subject to a substantial risk of

forfeiture. If the employee continues working, future defer-

A nonqualified deferred compensation plan is a plan or

rals are social security and Medicare wages when they are

arrangement established and maintained by an employer

earned.

for one or more of its employees that provides for the

Do not include in box 11 deferrals that are in-

deferral of compensation, but does not meet the require-

cluded in boxes 3 and/or 5 and that are for current

ments for a tax-qualified deferred compensation plan. For

year services.

social security and Medicare purposes, deferred compen-

CAUTION

sation plans for employees of state and local governments

(section 457 plans) are treated the same as nonqualified

Risk of forfeiture lapses at retirement. When an em-

plans. Nonqualified and section 457 plans are reported

ployee’s right to a payment is contingent upon working until

differently than other special wage payments. See

Report-

retirement, report all past contributions to the plan (or the

ing Amounts Deferred to Nonqualified and Section 457

value of the plan), including accumulated earned interest,

Plans

below for specific instructions.

as social security and/or Medicare wages in the year of

retirement. Add the amount to other wages paid in that

year, and enter in box 3 (up to the wage base maximum)

Reporting Amounts Deferred to

and/or box 5 of Form W-2.

Nonqualified and Section 457 Plans

Report in box 11 of Form W-2 the amount of deferrals,

Generally, when the related services are performed, non-

including any accumulated interest, that became taxable

qualified deferred compensation is subject to social secur-

for social security and Medicare taxes during the year (but

ity and Medicare tax when deferred. However, if

were for prior year services) because the deferred

nonqualified and section 457 plans contain provisions that

amounts were no longer subject to a substantial risk of

delay the employee’s right to receive payments from the

forfeiture.

plan, a period of substantial risk of forfeiture exists. The

Do not include in box 11 deferrals that are in-

plans’ deferrals, or contributions, are not subject to social

cluded in boxes 3 and/or 5 and that are for current

security and Medicare taxes until the period of substantial

year services.

risk of forfeiture ends.

CAUTION

Page 8

Publication 957 (May 2010)

Publication 957 - Reporting Back Pay And Special Wage Payments To The Social Security Administration Page 8

Related Articles

Related forms

Related Categories