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PDtax
PDtax, CPA firm owner
Category: Social Security
Satisfied Customers: 1982
Experience:  32 years tax and professional advice in all matters money
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Is a 457(f) distribution considered a "special payment" and

Customer Question

Is a 457(f) distribution considered a "special payment" and therefor not counted as earned income in the year received, which then requires an offset against social security payments for an individual receiving SS payments prior to reaching full retirement age?
Submitted: 1 year ago.
Category: Social Security
Expert:  PDtax replied 1 year ago.

PDtax :

Welcome to the site. I will be helping you today.

PDtax :

Payments from a 457(f) deferred compensation plan will likely be treated as wages on a
W-2 from your employer for 2013. As such, they will count as wages for the social security limit.

PDtax :

SSA will send you employer a form to disclose any 457 or other special payments (http://www.ssa.gov/online/ssa-131.pdf is a link to the form). On it, SSA asks for any 457 payments as follows:

PDtax :

6. Nonqualified deferred compensation and section 457 plans only. If you were unable to report nonqualified deferred compensation or section 457 plan payments and deferrals (contributions) on Form W-2 because both payments and deferrals occurred during the year, show the amount of wages earned by the employee during the tax year. Generally, the wages earned will be the compensation reported in block 1 of Form W-2 less payments from a nonqualified deferred compensation (or 457) plan, but including any amounts deferred under the plan during the tax year (See IRS Publication 957).

PDtax :

Therefore, it is apparent SSA will count the deferred comp payments made to you as wages in the year of receipt.

PDtax :

Thanks for asking at Just Answer. Follow up questions are encouraged. I'm PDtax.

PDtax, CPA firm owner
Category: Social Security
Satisfied Customers: 1982
Experience: 32 years tax and professional advice in all matters money
PDtax and 4 other Social Security Specialists are ready to help you
Customer: replied 1 year ago.

I didn't ask my question very well. I just came from the Social Security office. They agreed that the payment from my 457f was a "special payment" in the form of deferred compensation. Therefore it does not count towards toward the earnings limit for purposes of determining whether there was excess earnings in that year, which would trigger recapture of an overpayment. I'm happy to report that no so-called overpayment occurred so none will be recaptured. Unfortunately, your answer wasn't helpful, but my question wasn't clear. Perhaps you could have asked for clarification before answering.

Expert:  PDtax replied 1 year ago.
I appreciate the follow up.

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