TN 23 (06-10)

Citations: Social Security Act , Secs. 209(a)-(k); 20 CFR 404.1041

A. Definitions of wages and exclusions

The following are definitions for wages, wage exclusions, payments that are not wages and qualified plans or benefits.

1. Wages

Means all remuneration for services performed in an employment relationship not excluded by the Act.

2. Wage Exclusions

Refers to wages, which at the time of payment, are either totally or partly excluded from being treated as wages under a provision in Sections 209(a)-(k) of the Act.

3. Payments that are not wages

Means remuneration, which may arise from an employment relationship but is not payment for work performed.

4. Qualified

As used in qualified plans, qualified benefits, etc., refers to having complied with or met specific requirements or conditions of the Internal Revenue Code (IRC) and/or the Act.

B. Introduction to wage exclusions and Internal Revenue Code (IRC)

1. General explanation of wage exclusions

This subchapter explains the various wage exclusions and outlines the basic policies and rules which apply and must be followed in establishing when a payment qualifies as a wage exclusion under the Act.

2. Role of the Internal Revenue Code (IRC)

These instructions make extensive reference to the IRC because many of the wage exclusions under the Act are predicated on the payments having been made pursuant to provisions in one or more sections of the IRC. Generally, under the IRC all or part of these payments are tax-exempt or taxation is deferred to a later point in time.

C. Policy for wage exclusions

1. General explanation of what qualifies as a wage exclusion

A payment arising from an employment situation qualifies as a wage exclusion only if:

1. The payment is specifically excluded from being treated as wages in Sections 209(a)-(k) of the Act, and

2. The payment is made on the employer's behalf with the employer's own funds, to or on behalf of the employee, to or from a plan established by the employer, and

3. The employee does not have the option to take the employer's contribution in cash.

EXCEPTION: For cafeteria plans, see RS 01402.030.

2. Applying the IRC

SSA does not interpret the IRC. It is the responsibility of the employer or employee to furnish, when requested by SSA, the documentation necessary to establish that the provisions of the applicable section of the IRC have been met.