Recently, the IRS released the 2009 Form 8955-SSA. The new form replaces the Schedule SSA which was filed with the Form 5500. The IRS has made several changes in the new form. None was more significant than the new question asking whether “ … The plan administrator provide[d] an individual statement to each participant required to receive a statement" (line 8). Because most plans were unaware of the individual statement, the requirement to provide one has largely been ignored. This article addresses the individual statement requirement.

What is the individual statement requirement?

The plan administrator of an employee retirement benefit plan must provide each participant required to be reported on the Form 8955-SSA a statement describing the deferred vested benefit to which the participant is entitled. The statement also must include the information reported on the Form 8955-SSA with respect to the participant.

What employee retirement benefit plans must file a Form 8955-SSA (and thus, comply with the individual statement requirement)?

A plan to which ERISA’s vesting requirements apply for any day in the plan year must provide individual statements. These are the same plans which must file Form 8955-SSA. Note that while governmental and church plans, which are exempt from ERISA, can file Form 8955-SSA, they need not do so and are not subject to the individual statement requirement.

Must a plan provide an individual statement to a participant who has a benefit transferred into a new plan (Code C) or to a participant who was previously reported on an SSA (Code D) but whose deferred vested benefit is no longer held by the plan (generally, because the plan has paid the benefits to the participant)?

This is unclear. The regulations require the plan to provide each participant with respect to whom information is required to be filed on Form 8955-SSA a statement describing the benefit to which the participant is entitled. The instructions now require a plan to report participants subject to Codes C and D reporting. However, the regulations continue to indicate that reporting of such participants is optional. Regardless, providing a statement to a participant who is no longer entitled to a benefit from the plan (Code D), would seem to be an unnecessary exercise.

What is the deadline for providing the individual statement?

The plan administrator needs to provide the statement to the participant no later than date on which the plan is to file the Form 8955-SSA with the IRS (including extensions). Thus, the deadline with regard to individual statements for 2009 and 2010 Forms 8955-SSA is January 17, 2012 (or possibly later depending on the plan year).

What is the authority for requiring a plan to provide the individual statement?

See Code §6057(e) and Treas. Reg. §301-6057-1.

Is the individual statement a new requirement?

No. The requirement became effective for plan years beginning after December 31, 1975. Under Schedule SSA, the IRS did not include a question regarding the requirement so most practitioners were unaware of the requirement.

Is there a penalty for failing to provide the individual statement?

Yes. The Code imposes a $50 penalty on the plan administrator for each willful failure to furnish the statement or for a willful furnishing of a false statement. Note: With the addition of the question regarding the individual statement, a plan administrator will have a difficult time arguing ignorance of the requirement.

What information must be included in the individual statement?

The regulations indicate that the statement needs to include the following participant information from the SSA:

1. The social security number of the participant. Note: With current concerns regarding identity theft, it is doubtful the IRS would challenge a plan’s decision not to include the social security number or to include a partial number (e.g., xxxx-xx-1234).
2. The participant’s name.
3. Type of annuity (lump sum, term certain annuity, life annuity, etc.).
4. Type of payment (lump sum, annually, monthly, etc.).
5. For defined benefit plans, amount of the periodic payment.
6. For defined contribution plans – the total value of the participant’s account. Note: Although the form and the instructions refer to “total" value of the account, we interpret this to mean the total vested account balance. Code §6057 refers to deferred vested benefit.

May a plan satisfy the individual statement requirement by providing a benefit statement (required by PPA) along with the distribution forms?

Perhaps so, particularly for defined contribution plans. Participant-directed defined contribution plans must provide participant benefit statements quarterly. Other defined contribution plans must provide the statements annually. These statements contain the participant’s name and the deferred vested benefit. The distribution forms (notice and election forms) generally will contain the type of annuity (e.g., lump sum) and the type of payment (e.g., lump sum). Therefore, assuming the plan provides for distribution no later than the year following termination of employment, the benefit statement and the distribution forms will provide all of the necessary information (with the exception of the social security number). Of course, if the plan does not provide the distribution forms by the deadline for providing the individual statement, the benefit statement by itself generally will not satisfy the individual statement requirement.

A defined benefit plan is less likely to be able to rely on the benefit statement and the distribution forms to satisfy the individual statement requirement. The law requires defined benefit plans to provide benefit statements every three years, and so there may not be a statement reflecting the value on the Form 8955-SSA. Furthermore, many defined benefit plans do not provide for immediate distribution so the plan possibly would not provide distribution forms by the deadline for the individual statement.

Note: In response to our question as to whether the benefit statement along with the distribution forms would satisfy the Form 8955-SSA individual statement requirement, the IRS, without elaboration, declined to answer, indicating that the plan must comply with the statutory and regulatory requirements.

Can a plan use multiple forms (benefit statement and distribution forms) to satisfy the individual statement requirement?

Nothing in the statute or the regulations discusses using multiple forms to satisfy the requirement. However, the IRS generally has been flexible in permitting plans to satisfy the plan documentation requirements with multiple documents.

Does Relius have a form available to satisfy the individual statement requirement?

Yes. It is Form 927 in the ERISA Forms section of The Pension Library.

This topic will be covered in the ERISA Workshop.
ERISA Workshop, A 1-day program, October – December, in 22 cities
Staying ahead of the game and keeping the plans that count on you safe from IRS, DOL, or participant issues is a perpetual challenge in today’s fast-changing environment. How do you deal with a DOL investigator saying there’s a fiduciary breach for failure to collect employer contributions? How do you evaluate the risks and opportunities of the “open" multiple employer plan design that is rapidly gaining attention? How do you satisfy the filing requirements in this first year of Form 8955-SSA, as well as the duty to provide individual statements to participants? How do you prepare for participant and service provider disclosures in an environment of shifting deadlines? These are just some of the topics we’ll cover. Program details and online registration will be available mid-August on our Web site.