The definition of "wages" in FUTA was amended in a number of respects by the addition of new subsection (r) to Section
    3306 and by amendment of subsection (b) of Section 3306.  These changes impact on certain fringe benefits that include
    cash or deferred arrangements, tax-sheltered annuities, and nonqualified deferred compensation plans.  Under a cash or
    deferred arrangement forming a part of a qualified profit-sharing plan or stock bonus plan, a covered employee may elect to
    have the employer contribute an amount to the plan on the employee's behalf or to receive such amount directly in cash.
    Under a cafeteria plan, so-called, an employee may choose among various benefits including cash, taxable benefits and
    nontaxable benefits (including a cash or deferred arrangement) offered under the plan.  Amounts paid by an employer under
    a cash or deferred arrangement (whether part of a cafeteria plan) will be taxable as wages under FUTA.

    Subject to certain limitations, amounts paid by the employer for a tax-sheltered annuity for an eligible employee may be
    excluded from an employee's income.  Tax-sheltered annuities may be purchased for employees of educational institutions
    and certain tax exempt organizations, pursuant to a salary reduction agreement.  Amounts paid by a nontaxable employer
    will not be taxable under FUTA.

    Amounts deferred under a nonqualified deferred compensation plan generally are taxable when paid or when there is no
    substantial risk of forfeiture by the employee, depending on whether the plan is unfunded or funded.  Such plans may be used
    by taxable employers to provide retirement benefits in excess of those permitted under tax-qualified retirement plans or
    coverage limited primarily to highly compensated or management employees.  They are also used by tax exempt employers
    and by State and local governments.  Such amounts will be included in an employee's wage base for benefit purposes when
    the services are performed or later when there is a lapse of a substantial risk of forfeiture (within the meaning of Section 83
    of the Internal Revenue Code) of the employee's rights to such amounts.

    Any payment (other than vacation or sick pay) made to an employee after the month when he or she attains age 62, where
    the employee did not work for the employer in the period in which such payment is made, will be included as wages if the
    payment is made with the expectation that the individual will subsequently render services.  This provision is effective with
    respect to remuneration paid after 1983.

    In the Rowan decision of June 8, 1981, the U.S. Supreme Court held that "wages"' under FUTA do not include the cash
    value of meals and lodging furnished for the convenience of the employer.  (See UIPL 39-81 for further details of the
    decision).  The substance of the decision is codified in FUTA, with a limitation on the reach of the Rowan decision that
    exclusion from "wages" for income taxation shall not alone be construed to require a similar exclusion for FUTA.

    Employer payments to or on behalf of an employee under a simplified employee pension plan (SEP) are excluded from
    "wages."

    Since administration of these provisions is the responsibility of the Secretary of Treasury, any questions concerning their
    application and interpretation should be directed to the Internal Revenue Service.

    All of the amendments described above are effective with respect to wages paid after Decmber 31, 1984, except where
    explicitly specified otherwise.  The amended provisions of Section 3306(b) and new subsection (r) as enacted by P.L.
    98-21 are given below.

                3306(b) Wages--. For purposes of this chapter, the term "wages" means all remuneration for employment, including
                the cash value of all remuneration paid in any medium other than cash; except that such term shall not include-

                            (1) that part of the remuneration which, after remuneration (other than remuneration referred to in the
                        succeeding paragraphs of this subsection) equal to $7,000 with respect to employment has been paid to an
                        individual by an employer during any calendar year, is paid to such individual by such employer during such
                        calendar year.  If an employer (hereinafter referred to as successor employer) during any calendar year
                        acquires substantially all the property used in a trade or business of another employer (hereinafter referred to as
                        a predecessor), or used in a separate unit of a trade or business of a predecessor, and immediately after the
                        acquisition employs in his trade or business an individual who immediately prior to the acquisition was
                        employed in the trade or business of such predecessor, then, for the purpose of determing whether the
                        successor employer has paid remuneration (other than remuneration referred to in the succeeding paragraphs of
                        this subsection) with respect to employment equal to $7,000 to such individual during such calendar year, any
                        remuneration (other than remuneration referred to in the succeeding paragraphs of this subsection) with respect
                        to employment paid (or considered under this paragraph as having been paid) to such individual by such
                        predecessor during such calendar year and prior to such acquisition shall be considered as having been paid by
                        such successor employer;

                            (2) the amount of any payment (including any amount paid by an employer for insurance or annuities, or into
                        a fund, to provide for any such payment) made to, or on behalf of, an employee or any of his dependents under
                        a plan or system established by an employer which makes provision for his employees generally (or for his
                        employees generally and their dependents) or for a class or classes of his employees (or for a class, or classes
                        of his employees and their dependents), on account of--

                                    [(A) retirement, or]

                            [B]  (A) sickness or accident disability (but in the case of payments made to an employee or any of his
                        dependents, this subparagraph shall exclude from the term "wages" only payments which are received under
                        a workman's compensation law) , or

                            [C] (B) medical or hospitalization expenses in connection with sickness or accident disability, or

                            [D] (C) death;

                            [(3) any payment made to an employee (including any amount paid by an employer for insurance or
                            annuities, or into a fund, to provide for any such payment) on accountof retirement;]

                            (4)  any payment on account of sickness or accident disability, or medical or hospitalization expenses in
                        connection with sickness or accident disability, made by an employer to, or on behalf of, an employee after
                            the expiration of 6 calendar months following the last calendar month in which the employee worked
                            for such employer;

                            (5) any payment made to, or on behalf of, an employee or his beneficiary-

                                    (A) from or to a trust described in section 401(a) which is exempt from tax under section 501(a) at the
                                time of such payment unless such payment is made to an employee of the trust as remuneration for
                                services rendered as such employee and not as a beneficiary of the trust, or

                                    (B) under or to an annuity plan which, at the time of such payment, is a plan described in section
                                403(a),

                                    (C) under or to a bond purchase plan which, at the time of such payment, is a qualified bond purchase
                                plan described in section 405(a), [or]

                                    (D) under a simplified employee pension if, at the time of the payment, it is reasonable to believe that
                                the employee will be entitled to a deduction under section 219(b)(2) for such payment, [;]

                                    (E) under or to an annuity contract described in Section 403(b), other than a payment for the purchase
                            of such contract which is made by reason of a salary reduction agreement whether evidenced by a written
                                instrument or otherwise),

                                    (F) under or to an exempt_governmental deferred compensation plan (as defined in Section
                            3121(x)(3), or

                                    (G) to supplement pension benefits under a plan or trust described in any of the foregoing provisions of
                             this paragraph to take into account some portion or all of the increase in the cost of living ,(as determined
                             by the Secretary of Labor) since retirement but only if such suplemental payments are under a plan which
                             is treated as a welfare plan. under section 3 2 B)(ii) of a Employee Retirement Income Security Act of
                             1974.

                        (6) the payment by an employer (without deduction from the remuneration of the employee)-

                                    (A) of the tax imposed upon an employee under section 3101, or

                                    (B) of any payment required from an employee under a State unemployment compensation law,
                                    with respect to remuneration paid to an employee for domestic service in a private home of the
                                    employer or for agricultural labor;

                        (7) remuneration paid in any medium other than cash to an employee for service not in the course of the
                    employer's trade or business;

                        [ (8) any payment (other than vacation or sick pay) made to an employee after the month in which he attains the
                    age of 65, if he did not work for the employer in the period for which such payment is made:]

                        (9) remuneration paid to or on behalf of an employee if (and to the extent that) at the time of the payment of
                 such remuneration it is reasonable to believe that a corresponding deduction is allowable under section 217;

                        (10) any payment or series of payments by an employer to an employee or any of his dependents which is
                    paid--

                                (A) upon or after the termination of an employee's employment relationship because of (i) death, or
                            (ii) retirement for disability, [or (iii) retirement after attaining an age specified in the plan referred to in
                            subparagraph (B) or in a pension plan of the employer,] and

                                (B) under a plan established by the employer which makes provision for his employees generally or a
                            class or classes of his employees (or for such employees or class or classes of employees and their
                            dependents), other than anysuch payment or series of payments which would have been paid if the
                            employee's employment relationship had not been so terminated;

                        (11) remuneration for agricultural labor paid in any medium other than cash;

                        (12) any contribution, payment, or service, provided by an employer which may be excluded from the gross
                    income of an employee, his spouse, or his dependents, under the provisions of section 120 (relating to amounts
                    received under qualified group legal services plans); [or]

                        (13) any payment made, or benefit furnished, to or for the benefit of an employee if at the time of such payment
                    or such furnishing it is reasonable to believe that the employee will be able to exclude such payment or benefit
                    from income under section 127 or 129 [.], or

                        (14) the value of any meals or lodging furnished by or on behalf of the employer if at the time of such
                 furnishing it is reasonable to believe that the employee will be able to exclude such items from income under
                 section 119.

                     Nothing in the regulations prescribed for purposes of chapter 24 (relating to income tax withholding) which
                     provides an exclusion from "wages" as used in such chapter shall be construed to require a similar exclusion
                     from "wages" in the regulations prescribed for purposes of this chapter.

    Except as otherwise provided in regulations prescribed by the Secretary, any third party which makes a payment included in
    wages solely by reason of the parenthetical matter contained in subparagraph (A) of paragraph (2) shall be treated for
    purposes of this chapter and chapter 22 as the employer with respect to such wages.

                [3306] (r) Treatment of Certain Deferred Compensation and Salary Reduction Arrangements.---

                            (1) Certain Employer Contributions Treated As Wages.--

             Nothing in any paragraph of subsection (b) (other than paragraph (1)) shall exclude from the term "wages"--

                        (A) any employer contribution under a qualified cash or deferred arrangement as defined in section 401(k)) to
                     the extent not included in gross income b reason-of section 402 (a)(8) , or

                        (B) any amount treated as an employer contribution under section 414 (h)(2).

                        (2) Treatment of Certain Nonqualified Deferred Compensation Plans.--

                        (A) In general. - Any amount deferred under a nonqualified deferred compensation plan shall be taken into
                      account for purposes of this chapter as of the later of--

                        (i) when the services are performed, or

                        (ii) when there is no substantial risk of forfeiture of the rights to such amount.

                        (B) Taxed only once.  - Any amount taken into account as wages by reason of subparagraph (A) ,(and the
                      income attributable thereto) shall not thereafter be treated as wages for purposes of this chapter.

                        (C) Nonqualified deferred compensation plan.  - For purposes of is paragraph, the term nonqualified deferred
                      compensation plan" means any plan or other arrangement for deferral of compensation other than a plan
                      described in subsection b (5). (New language underlined; Bracketed material deleted).

    The above language was quoted as amended.  The discrepancies noted in the citations for various numbered or lettered
    sections resulted from the legislative failure to make the needed changes to accommodate the new amendments.