457b pay out (originally deferred as a PR deduction)

We have employees that all allowed to make a PR deduction into a non-qualified 457b account.  Then when the employee terminates; they need to have the account paid out.  Payroll pays out the money (not the bank that was holding the funds).  Does anyone else have a similar situation and if so how do you have it set up? I know that when they had the 457b deduction; it was FICA taxed and federal and state deferred.  So now when they receive this deferred money; the opposite is true.  So FICA exempt and federal and state taxable. And then the earnings all have to be taxed as well. My concern is when I pay this through payroll; it will go into their gross pay again, and it was already in their gross pay back when they deferred it via the payroll deduction. 
Thank you for any help!  Bonnie