The IRS has issued the 2009 Form 8955-SSA and extended the due date for the 2009 and 2010 Form 8955-SSA to the later of January 17, 2012 or the due date that generally applies for filing the 2010 Form 8955-SSA. The 2010 Form 8955-SSA has not been issued. The January 17, 2012 due date may not be extended by filing a Form 5558. The revised Form 5558 has not yet been issued.
The Form 8955-SSA is used to report information about separated participants with deferred vested benefits. The IRC imposes a penalty for failure to file of $1 for each participant not reported multiplied by the number of days the failure continues to a maximum penalty of $5,000.
It is important to keep in mind that the plan administrator must provide an individual statement to each affected participant. A penalty of $50 is imposed on the person required to furnish the statement to each affected participant for each willful failure to furnish the statement or a willful furnishing of a false statement. No sample statements have been provided to date.
Previously, Schedule SSA was used to report on separated participants with deferred vested benefits until the DOL mandated electronic filing of the Form 5500. The DOL electronic mandate did not apply to the Schedule SSA (an IRS form) and it was removed from the Form 5500 filings beginning with the 2009 plan year.
Form 8955-SSA is used to report participants who have a deferred vested benefit under the plan plan and who:
- Separated from service covered by the plan;
- Were reported as deferred vested participants on another plan’s filing if their benefits were transferred (other than a rollover) to the plan during the covered period
- Previously were reported under the plan but have been paid out or are no longer entitled to those deferred vested benefits; or
- Previously were reported under the plan but whose information is being corrected.
The Form 8955-SSA is a stand-alone form to be filed with the IRS and should be used for the 2009 plan year filing. The 2010 Form 8955-SSA is being developed and expected later this year. Plan Sponsors may file 2009 and 2010 plan year information on the 2009 Form 8955-SSA.
Generally, information on the deferred vested retirement benefit of a plan participant must be filed no later than the plan year following the plan year in which the participant separates from service. For example, if a participant terminates in 2009, the participant must be reported no later than the 2010 filing. A Form 8955-SSA need not be filed if there is no information to report.
The IRS is providing an electronic filing system in 2011 as optional filing alternative to filing on paper. Unless you a third party service provider you will need a Transmitter Control Code (TCC) which can be obtained by filing a Form 4419.
There has been a long standing requirement (IRC §6057(e)) that the plan administrator provide a statement to each participant reported on the Form 8955-SSA (previously the SSA). The statement must provide the participant with the information reported on the Form 8955-SSA.
What is noteworthy on the Form 8955-SSA is question 8 which requires a yes or no answer– “Did the plan administrator provide an individual statement to each participant required to receive a statement?” The government has not provided model language nor model statements. Many service providers automatically issue a deferred vested benefit statement as well as periodic benefit statements for defined benefit plans and quarterly statements for most defined contribution plans. In addition, many plan sponsors routinely issue termination packages to plan participants which provide information regarding the impact of termination of employment on company’s employee benefits. It is possible that the statements and termination packages may satisfy the requirements; but more guidance would be welcome.
As noted above, a penalty of $50 is imposed on the person required to furnish the statement to each affected participant for each willful failure to furnish the statement or a willful furnishing of a false statement.
What should plan sponsors do now?
- Contact your Form 5500 service provider if they already haven’t notified you regarding the new Form.
- Decide if you will report 2009 and 2010 separately or combined.
- Review your participant statements and termination packages to assess whether the information provided to participants can, at least for the 2009 filing, enable you to answer yes to question 8. For the 2010 filing, you may want to develop a simple participant statement to send to terminated participants with deferred vested benefits if your third party service provider doesn’t provide a sample statement.
More information can be found at the IRS website.
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Disclaimer: This material is for the sole purpose of providing general information and does not under any circumstances constitute legal advice and should not be used as a substitute for legal advice. You should seek the advice of counsel when applying the requirements to your plan. For more information on this ErisaALERT contact us by phone at 610-524-5351 and ask for Mary Andersen or 973-994-7539 and ask for Theresa Borzelli.