IRS Addresses Troubling New Question on Form 8955-SSA

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By Bill Kalten and Russ Hall

In a frequently asked question (FAQ) recently posted on its website, the Internal Revenue Service (IRS) clarified an issue that had been worrying filers of new Form 8955-SSA (which replaces Form 5500, Schedule SSA).

The form is used to report information about participants who separate from service with a deferred vested benefit. In general, plan administrators must report these participants on either the form for the plan year of the separation from service or the form for the following plan year. The relevant statute also requires plan administrators to send all listed participants a statement that contains the information on the form (i.e., among other things, the nature, amount and form of the participant's deferred vested benefit, the participant's Social Security number and certain status codes) as well as notification of any benefits that are forfeitable if the participant dies before a certain date.

Although the requirement to notify participants of forfeitable benefits has been in effect since 1984, compliance appears to have been uneven, perhaps due to confusion about the type of information that might satisfy the requirement. Moreover, rather than creating a separate statement, many plan administrators have been disclosing the required information to participants in a combination of documents, such as benefit statements, summary plan descriptions and election forms.

A new question (line 8) on Form 8955-SSA asks the plan administrator to state whether the plan provided an individual statement to each participant as required. Some employers were not certain how to answer the question, being unsure of whether they had fully complied or not.

According to the IRS FAQ, plan administrators may check "yes" on line 8 if they provided separated participants with the required information on time, regardless of whether the information was provided in a specific statement or through a combination of other plan documents, such as benefit statements or distribution forms. According to the FAQ, the statement must include the following information for each participant:

1. Plan name
2. Name and address of plan administrator
3. Participant name
4. Nature, amount and form of the deferred vested benefit

Notwithstanding the statutory language described above, the FAQ indicates that the statement need not include the participant's Social Security number, status codes or information about benefits that are forfeitable if the participant dies before a certain date.