There are many different types of wages. There is your standard wage you receive from work-related activities, but there can also be wages paid for illness, vacation, and of course income related to pensions and retirement pay. Social Security considers all of these types of income and has specific rules how this income qualifies for credits related to retirement and disability programs.
Does sick pay count as wages?
Payments you receive for sickness and accident disability count as wages for the first six calendar months after the last month you worked. (For payments made by an employer to a disabled former employee, see §1335.)
Does vacation pay count as wages?
Vacation pay and pay you receive instead of taking a vacation count as wages. It does not matter whether you are paid for a period that you did not work. It also does not matter if the payment is for additional compensation for vacation time you did not use.
Do Pension And Retirement Payments Count As Wages?
Effective January 1, 1984, your pension and retirement payments generally count as wages. However, they do not count as wages if the payments are made from tax-exempt trusts or qualified deferred compensation plans.
If you receive retirement payments because of a disability, the payments are not wages if they are made under the following conditions:
They are made under your employer’s plan;
They are made when or after your employment ends; and
Your retirement due to your disability was a condition or plan for the payment.
Do payments to a profit-sharing or stock bonus plan count as wages?
Effective January 1, 1984, payments your employer makes to a profit-sharing or stock bonus plan are wages if:
- You have the choice of receiving cash instead;
- The payments and the amounts are not included in your gross income because of section 402(a)(8) of the IRC; and
- One of the following conditions exists:
- The payments are made under a qualified cash or deferred arrangement; or
- The payments are made under section 401(k)(2) of the IRC.
The payments are counted as wages at the time the distributions are paid to the trust.
Do prizes and awards from persons other than your employer count as wages?
Prizes and awards you receive from persons other than your employer generally do not count as wages. An example would be a prize or award given by a manufacturer to a salesperson that handles the manufacturer’s product, but works for an employer.
Do payments from or to a tax-exempt annuity plan count as wages?
Payments made from or to an annuity or bond purchase plan on behalf of you or your beneficiary do not count as wages if at the time of payment the:
- Annuity plan is qualified under section 403(a) of the Internal Revenue Code (IRC); or
- Bond purchase plan is qualified under section 405(a) of the IRC.
Do payments from or to a tax-exempt trust fund count as wages?
Payments made from or to a tax-exempt trust fund on behalf of you or your beneficiary are not wages, if the payments made are “from or to a trust” that does not pay income tax under sections 401 and 501(a) of the Internal Revenue Code (IRC).
As you can see there are many types of payments that may be considered wages by Social Security and many have different impacts on Social Security eligibility.
