(b)lines Ask the Experts – Form 8955-SSA Data from Vendors

“Since I am currently struggling with my vendors to obtain a signature-ready form, I would like for the Experts to provide the entire “scoop” on the Form and its requirements so that I can understand why it has been a struggle to bring this issue to closure.”  

Michael A. Webb, Vice President, Retirement Plan Services, Cammack LaRhette Consulting, answers:  

You’ve come to the right place! Before I get to the issue of why you may being having difficulties in your presumed multiple-vendor 403(b) plan, let’s explain the filing process in detail and why it exists.    

First of all, time is running out for ERISA plan sponsors (church and government plans are exempt, but may file voluntarily: few do in the Experts’ experience) to file the Form 8955-SSA, as it must be filed by January 17, 2012.    

The 8955-SSA filing formerly known as Schedule SSA of the annual 5500 filing (it is no longer part of the 5500 report) generally reports participants who separated from service with a vested benefit, but did not receive a full distribution, and is applicable for 403(b) plans for the very first time with this 2012 filing deadline. The filing that is due January 17th must report participants who terminated employment in 2008 and 2009 (2010 terminated participants may be reported as well, but that is generally not advisable, as it results in over reporting).  Unlike the 5500 filing, which is electronically filed with the Department of Labor via their EFAST program, this form must be filed directly with the Internal Revenue Service.    

The reason that this form exists is that the IRS uses it to report participants to the Social Security Administration, who in turn notifies such individuals at retirement age of any retirement benefits of plans at prior employers that they might have forgotten. Thus, although not a requirement, you may wish to strongly consider reporting in future years participants previously reported who did not receive a full distribution at the time of reporting, but received a distribution in a later year (there is a special Code on the Form for reporting such individuals). That way, such individuals will not receive a letter from the SSA at retirement age indicating that they may be entitled to receive a benefit from your retirement plan, but in fact received a total distribution long ago. 

Preparations should be concluded, or nearly concluded, with your plan vendor(s) to either a) provide you with a signature-ready filing or b) provide you with the information necessary to complete the filing yourself. For more details, see the IRS Q&A in this regard; as stated in our prior Ask the Expert Column, pay special attention to the final Q&As on the list, which relate specifically to 403(b) plans. As indicated in the Q&A, not all participants are required to be reported. Participants who only maintain contracts that would have been excludable from Form 5500 reporting under DOL FAB 2009-02 (generally, fully vested contracts to which no contributions were made on or after January 1, 2009 whose rights are legally enforceable by the participant without employer involvement) need not be reported on Form 8955-SSA.   

You should also note that there is a related participant notice requirement for Form 8955-SSA. However, it is unclear as to whether existing participant communications (such as account statements) would satisfy this requirement. Thus, plan sponsors should consult with legal counsel well-versed in retirement plan issues as to whether a separate notification should be provided to participants, and the content of such notification.    

As for your issue with multiple vendors, the Form 8955-SSA can be complicated since the data is reported on a plan level basis. For example let’s say I have my 403(b) plan account balance split between Vendor X and Vendor Y, and terminated employment in 2008. At the time, I withdrew my entire account with Vendor X, but have left all of my funds on deposit with Vendor Y until this day. If you ask Vendor X to produce a signature ready Form 8955-SSA for your plan, they would NOT include this participant (since all funds were withdrawn from Vendor X) unless they were coordinating data with Vendor Y (where they would see that funds remain on deposit). Thus, coordination of vendor data is critical in filing a proper Form 8955-SSA in multiple-vendor plans (as it is for many other purposes as well).    

Despite this filing requirement, which can be quite burdensome for 403(b) plan sponsor who are tackling it for the first time, the Experts hope that you and all of our readers have a Happy New Year!   

NOTE: This feature is to provide general information only, does not constitute legal advice, and cannot be used or substituted for legal or tax advice.