TN 10 (09-90)
RS 01402.305 Payments Upon Death
Act, Secs. 209(a)(2)(C), 209(a)(11)(A);
20 CFR 404.1049(a)(2)(ii) and (b), 20 CFR 404.1059(f)
1. When Payments are not Wages
Payments are wage exclusions under the Act if:
Made under an employer's plan, and
Upon or after termination of employment, and
On account of the employee's death.
2. When Payments are Wages
Payments are not wage exclusions if they would have been made regardless of whether or how the employment terminated.
NOTE: The employee's death had to be a condition of the plan for the payment to be excluded from wages.
1. Payments Excluded From Wages
A plan provides that an award be paid to the employee in a specified number of annual installments beginning with the year in which the award is made. The employee then dies (or retires on account of disability), before all the installments are paid. All payments, including the payments after death (or retirement), are wages because they were scheduled to be made even if death had not occured.
2. Payments Excluded and not Excluded From Wages
The State of Y has a plan whereby it pays accumulated sick leave to an employee upon termination of employment, regardless of the reason for termination.
If the employment relationship is terminated by death (or retirement due to disability), the accumulated sick leave payments paid under the plan would be excluded from wages. If the employment relationship terminates for any other reason, payments under the plan would not be so excluded.
Payments under a plan can be either excluded or not excluded from wages, depending on the circumstances under which the payments are made. This may require development.
When development is necessary, follow these steps:
|1||Determine if the payments were made under the employer's plan. |
|2||If the payments were made under a plan, determine if the employment relationship terminated because of death (or retirement due to disability). |
|3||If the answer for step 2 is yes, then determine whether the payment would have been made had his/her employment not so terminated. This should be indicated by the provisions of the plan. If it is not clear from the plan, accept the employer's statement as to whether this condition is satisfied in the absence of evidence to the contrary.|
RS 01402.324, Retirement Payments On Account Of Disability.