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Anyone out there familiar with 26 CFR Parts 31 & 602 which apparantly now obligates beneficiaries of nonqualified pensions to pay medicare tax up front for the life of their pension. I retired 2+ years ago with such a plan and am now being hit with an immediate monster tab for medicare taxes based on the value of the total payments (the company says) I can expect to receive.....20 years out!!!! Company sent a corrected 1998 W-2C to the SSA with the numbers. Is this all correct? Thanks
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<< Anyone out there familiar with 26 CFR Parts 31 & 602 which apparantly now obligates beneficiaries of nonqualified pensions to pay medicare tax up front for the life of their pension. I retired 2+ years ago with such a plan and am now being hit with an immediate monster tab for medicare taxes based on the value of the total payments (the company says) I can expect to receive.....20 years out! >>

A progress report. I've found the regs, but haven't had a chance to digest them yet. Here are online links:

http://frwebgate.access.gpo.gov/cgi-bin/get-cfr.cgi?TITLE=26&PART=31&SECTION=3121(v)(2)-1&TYPE=TEXT

http://frwebgate.access.gpo.gov/cgi-bin/get-cfr.cgi?TITLE=26&PART=31&SECTION=3121(v)(2)-2&TYPE=TEXT

TMF ExRO
Phil Marti
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<< Anyone out there familiar with 26 CFR Parts 31 & 602 which apparantly now obligates beneficiaries of nonqualified pensions to pay medicare tax up front for the life of their pension. I retired 2+ years ago with such a plan and am now being hit with an immediate monster tab for medicare taxes based on the value of the total payments (the company says) I can expect to receive.....20 years out!!!! Company sent a corrected 1998 W-2C to the SSA with the numbers. Is this all correct? >>

Well, it looks to be correct, at least according to the law. Congress made this change in 1983/84. Before this change you paid FICA/Medicare as payments were received. With this change, finally implemented through these regualtions, you pay up front.

If it's any comfort to you, there's an advantage here for you, assuming you've actually retired. Under the old rules you would have paid FICA every year to the FICA maximum. With the entire amount lumped in one year, you'll pay at most that year's maximum in FICA.

You didn't give us enough infomration about the specifics of your plan for research as to whether your employer is accurately proceeding under the regulations. If you take a look at the regs you'll see a lot of detailed instructions for various types of plans.

TMF ExRO
Phil Marti
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