Answer

Dear XXXXXXXXXX,

 

That is ok, let me answer this way;

 

If the plan is nonqualified, it is subject to taxes at the time you are paid.

 

a. The general FICA RULE for nonqualified plans:
NQDC amounts are taken into account for FICA tax purposes at the later of when the services are performed or when there is no substantial risk of forfeiture with respect to the employee's right to receive the deferred amounts in a later calendar year.

Thus, amounts are subject to FICA taxes at the time of deferral, unless the employee is required to perform substantial future services in order for the employee to have a legal right to the future payment.

If the employee is required to perform future services in order to have a vested right to the future payment, the deferred amount (plus earnings up to the date of vesting) are subject to FICA taxes when all the required services have been performed. FICA taxes apply up to the annual wage base for Social Security taxes and without limitations for Medicare taxes.

For Qualified plans, the FICA is not taken at the time of the deferrel.

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