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Deferred Comp and Payroll Totals

I'm new in the payroll field and have a question regarding payroll. we have an employee that is retired and receiving annuity deferred comp payouts. Our vendor pays us and we then pay out the employee (separate from payroll). We then update the YTD for the employee by creating a manual check. Should that amount effect the total payroll that we fund?

Hope that makes sense!

Comments

  • Deferred Compensation Plans can be either Qualified or Non-Qualified. Qualified Plans require the use of a third party trustee who among other things makes the payment directly to the employee. For Qualified Plans such as 401(k), it is not legally possible for the employer to see the money again, once it has been sent. This is a function of the ERISA law, not my personal opinion. The employee does not normally even talk to the employer about "old" money which has already been sent to the trustee. It is legally suppose to be well beyond the employer's reach.

    So presumably you are talking about Non-Qualified Deferred Compensation Plans (NQDCP), probably involving (former) Executives. These are normally fully subject to normal income tax withholding and reporting (federal and state). Such payments are not normally subject to FICA, or DI or other taxes, although that is a very qualified statement. If I was you, I would be reading the plan and finding out exactly what the rules are for YOUR plan. There are limits to how accurate any answer made by someone who has not read your plan document (like me) can be. NQDCP, particularly ones which were not updated when the 2009 rules changed are legally arcane.

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