Hi there,
I have an amount in my box 11 for non-qualified plans. Basically, I receive a SERP which vests every 3 years. When a vesting event occurs, my company takes out 37% federal income tax and 2.35% for FICA because the risk of forfeiture (see note below) even though a distribution does not occur until after I separate from service. See note below. I am confused on how I should respond to the Turbo Tax question - "Did you take money out of your non-qualified pension plan (we just need to check whether the amount in box 11 is money you contributed to your plan or if it is money you took out of your plan". I answered no since I did not take any money out and it is not a distribution. Is that right? Checking yes or no seems to have no impact on my taxes.
Sincerely
Justin
"As a tax-exempt organization, XXXX has an obligation to withhold the Medicare portion of FICA tax and
both federal and state (if applicable) income tax on the value of vested benefits you earn each year in the
non-qualified retirement plans sponsored by XXX, even though plan benefits are not distributable
until after you separate from service. Participants in the Defined Contribution Restoration Plan (DC
Restoration Plan) and the Defined Contribution Supplemental Executive Retirement Plan (DC SERP) are
affected by this requirement.
Once vested, the IRS no longer considers the benefit subject to a “substantial risk of forfeiture,” and, under
IRS rules, a non-qualified plan benefit that is no longer subject to a substantial risk of forfeiture becomes
taxable. You are receiving this letter because you are being taxed in accordance with these IRS rules.
