FICA tax refunds for deferred compensation denied

Beavis v. United States (Fed. Cir. 2025)

The Federal Circuit affirmed dismissal of retired United Airlines pilots’ FICA tax refund suits, holding that FICA taxes on deferred compensation under 26 U.S.C. §3121(v)(2) were lawfully assessed when benefits began, even if the plan later terminated and benefits were not fully received.

Holding

The court held that the FICA taxes paid on the present value of deferred compensation benefits were validly assessed under §3121(v)(2).

The Claims Court properly dismissed refund claims for failure to state a claim and for lack of jurisdiction where one plaintiff’s administrative claim was untimely.

Section 3121(v)(2) is constitutional, as FICA is an excise tax rather than an income tax, and its timing rule lawfully applies to deferred benefits.

Why It Matters

• Confirms that FICA taxes on nonqualified deferred compensation are assessed when benefits vest or payments begin, not when received.

• Clarifies that §3121(v)(2)’s special timing rule is constitutionally valid and not subject to income tax rea…