The IRS released a draft of the 2010 Form 8955-SSA and instructions. The IRS made no significant changes to the form (e.g., dates changed; box 1b made smaller).

The only significant change was to the “What’s New" section of the instructions. The draft instructions provide that once the 2010 form is released, a separate 2009 form can no longer be filed for 2010 reportable information. Depending on when the IRS releases the 2010 form, the delay may make it difficult for software providers to make available the 2010 form on software before the January 17, 2012 deadline.

To understand what is involved with this change, and the options available to a plan administrator, one must first understand the regular reporting rules, the optional reporting rule, and the two 2010 transition rules. The following FAQs will explain these rules and their interaction.

What categories of participants does Form 8955-SSA list?

There are three primary categories of participants on Form 8955-SSA:
Category A: Participant who separates with deferred vested benefits
Category C: Participant whose benefit was previously reported on the SSA of a different plan sponsor but whose benefit was later transferred to the plan
Category D: Participant who was previously reported on an SSA but who is no longer entitled to deferred vested benefits under the plan (most often because of payment)

There is a fourth category, B, for changes in previously reported information. That category is optional and will not be discussed here.

When does a plan report a Category A participant under the regular reporting rules?

If the plan is a single employer plan, the plan reports a participant who separates with a deferred vested benefit in the year following separation. However, if the plan begins paying the benefit or forfeits the benefit, or the participant returns to work with the employer prior to the date the return is filed, the plan does not return the benefit.

Example: In all examples in this Technical Update, the plan has a calendar plan year and is a single employer plan. A participant separates from service in 2011, has a vested benefit, and does not commence receiving that benefit. The plan reports the participant on the 2012 Form 8955-SSA.

When does a plan report participants in Categories C and D under the regular reporting rules?

Report a category C participant on the return for the year the plan receives the transfer of the benefit. Report a category D participant on the return for the year the plan pays the benefit (or the participant otherwise loses the right to the benefit).

Example: Target Plan transfers its assets and account liabilities to Buyer Plan on August 1, 2011. Target Plan reports on its 2011 Form 8955-SSA as Category D all participants reported on previous returns. Buyer plan reports on its 2011 Form 8955-SSA as Category C all participants Target previously reported whose benefits were transferred to Buyer. If Buyer is uncertain whether Target has previously reported a given participant, report that participant as Category A instead on the 2011 return.

Under the regular rules, which participants are reported on the 2009 Form 8955-SSA?

A single employer plan reports on the 2009 form:

• Category A participants who severed in 2008 (and did not receive payment, forfeit their benefit, or return to work prior to the date the return is filed,
• Category C participants whose benefits were transferred in during 2009, and
• Category D participants whose benefits were paid out during 2009.

Under the regular rules, which participants are reported on the 2010 Form 8955-SSA?

A single employer plan reports on the 2010 form:

• Category A participants who severed in 2009 (and did not receive payment, forfeit their benefit, or return to work prior to the date the return is filed,
• Category C participants whose benefits were transferred in during 2010, and
• Category D participants whose benefits were paid out during 2010.

What is the optional reporting rule?

The optional reporting rule allows a plan to report category A participants early. The 2010 draft instructions describe this rule: “You can report a deferred vested participant on the Form 8955-SSA for the plan year in which the participant separates from service under the plan if you want to report earlier." This is a carryover from the old Form SSA instructions. The optional rule does not affect the reporting of Category C or Category D participants.

Example: Jack quits August 1, 2011. The plan can report Jack as a Category A participant on the 2012 Form 8955-SSA (under the regular rule), or on the 2011 Form 8955-SSA (under the optional rule). The plan would not report Jack on both returns.

What are the two 2010 transition rules?

Under special transition rules, a plan has had the following options with regard to individuals who the plan would report under the regular rules on the 2010 Form 8955-SSA:

1. Report them on a separate 2009 form. Accordingly, the plan would file one 2009 Form 8955-SSA for 2009 and a separate 2009 Form 8955-SSA for 2010).
2. Combine them with individuals listed on the 2009 form. Under this option, the plan would file one 2009 Form 8955-SSA for 2009 listing all the participants who would otherwise be listed on the 2009 and 2010 returns.

What changes do the draft instructions make?

The draft instructions eliminate the two 2010 transition rules.

Can I still use the 2010 transition rules?

Yes, you can, so long as you file the return before the IRS issues the final version of the 2010 form. Suppose, for example, the plan is using the first transition rule, and filing for 2009 and 2010 on separate 2009 forms. If the IRS receives the forms before it issues the 2010 form, that should be fine. If the IRS receives the forms after it issues the 2010 form, the IRS may insist that the plan complete a 2010 form for 2010 information.

Do the draft instructions change the optional reporting rule?

No, they do not. Consider the following examples:

Example 1: A plan has 10 participants who terminated employment with vested benefits in 2008 and 6 who terminated in 2009. None of the participants were paid prior to the date the plan files its Form 8955-SSA, January 17, 2012. The plan has no Category C or Category D participants. The plan files a single 2009 Form 8955-SSA listing all 16 terminees. The return is valid under the optional rule. The plan would not file a return for 2010.

Example 2: Assume the same facts as Example 1, except there was a participant who was reported on the 2007 return who the plan fully paid out in 2010. The optional reporting rule does not apply to that participant. The plan must file a 2010 return to report that participant, unless the plan uses one of the transition rules before the IRS issues the 2010 form.

What options does the plan have for reporting participants who must be reported on the 2010 Form 8955-SSA?

The following options currently exist:

• Wait until the IRS issues the final 2010 form and list the participants on that form.
• Use the optional reporting rule to list 2010 terminees on the 2009 form. Note that this alternative does not address Category C or Category D participants.
• If the plan files before the IRS issues the final 2010 form, either:
• Use a separate 2009 form to report 2010 information, or
• Combine 2009 and 2010 information into a single 2009 form

What is the difference between the optional rule and the transitional rule that permits a plan to combine the 2009 and 2010 information onto a single 2009 form?

Under the optional rule, a plan may report a Category A participant early but not a Category C or D participant. Under the transitional rule that permits a plan to combine the 2009 and 2010 information, the plan may combine all participant categories (A, B and C) for both years on a single form. Of course, the transitional rule expires when the IRS issues the final form but the optional rule continues.

What is the deadline for filing the 2009 and 2010 Forms 8955-SSA?

The deadline for the 2009 and the 2010 Forms 8955-SSA is the later of: (1) January 17, 2012, or (2) the due date that generally applies for filing the 2010 Form 8955-SSA (which is the same as the due date of Form 5500). A plan sponsor may not use the Form 5558 to obtain an extension of the January 17, 2012 due date. However, if a 2½ month extension would extend the normal deadline for a 2010 Form 8955-SSA beyond January 17, 2012, the plan sponsor may use the Form 5558 to obtain such an extension. The normal deadline for a Form 8955-SSA is the last day of the seventh month following the last day of the plan year.

ERISA Workshop. We will discuss the changes the new Form 8955-SSA requirements in our ERISA Workshop presented in October, November, and December. Other topics included in the Workshop are participant fee disclosure regulations, service provider fee disclosure regulations, Form 8955-SSA, “open" multiple employer plans, duty to collect delinquent participant contributions, QDROs, takeover cases and Current Developments. For more information and to register, visit our Web site.