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Nongovernmental 457(B) Taxes And W-2

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I am assisting with administering a nongovernmental 457(b) plan that a prior employee had started in April 2011. We have been merrilly taking payroll deductions without understanding all of the plan specifications. As we now face the first distribution for an empoyee who just retired, we have many questions. I am even questioning whether the past year of payroll deductions were even handled properly concering taxes and W-2 reporting.


As for the regular payroll deductions, Social Security and Mediare taxes are being withheld and the earnings included in Box 3 & 5 of W-2, but not Box 1. The contributions are also appearing in Box 12, code G.


There have been employER contributions to the accounts of some participants and those funds have not been processed through payroll. So at distribution upon termination of the employee, we end up with SS and Medicare having been paid on some of the funds and not on other funds.


How should routine payroll deductions be handled with regard to taxes and W-2?

How should the employER contribution to the account be handled?

How is a distribution at termination, when no longer a substantial risk of forfeiture, to be reported?

Would a distribution be reported on a W-2 in a year when no services were performed, if distribution was in the year following termination?


I would appreciate your feedback. Hopefully I have given enough detail but if further detail is needed to respond, I am eager to supply other necessary information to have this muddy situation clarified.


I'd also like to add one 457(f) question - should a distribution of a 457(f) be reported in Box 11 of the W-2?


Many thanks for your assistance. P.S. - Any suggestions on basic training on retirement plans?

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