"and this is the first time I have ever experienced this type of income being subject to SS and Medicare"

Well, part of the problem with nonqualified plans is that they are inconsistent.

It is likely your taxpayer's plan has a vesting period that was met previously. That would explain tax deferral. It isn't earned income now.

More typically, the amount is subject to Medicare and Social Security at the time it is deferred, and then subject to income tax when distributed.