On June 21, 2011, the IRS announced an extension of time to file the 2009 and 2010 Form 8955-SSA. The Form 8955-SSA replaces the Schedule SSA that used to be attached to the Form 5500. Terminated participants who are still due a benefit from a plan are reported on the Form 8955-SSA and this information is used by the Social Security Administration to notify individuals that they may be entitled to a benefit from an employer plan.
General Information
2009 Form 8955-SSA Available!
On June 18, 2011, the IRS posted the 2009 Form 8955-SSA on its website. The Form 8955-SSA is the successor to the Schedule SSA that previously was filed with the DOL along with rest of the Form 5500. The Form 8955-SSA is where the benefits for terminated employees with a vested accrued benefit or vested account balance are collected for the Social Security Administration (‘SSA’). The SSA uses this information to notify individuals that they may be entitled to benefit from a private retirement plan.
What special rules apply when performing the ADP/ACP test for union 401(k) plans?
If a 401(k) plan covers both union and non-union employees, the union and non-union employees must be mandatorily disaggregated for purposes of ADP and ACP testing.
Problem #3 Incorrect Definition of Compensation
The third error identified in the IRS 401(k) Fix-It Guide is using the incorrect definition of compensation. Every 401(k) plan document defines compensation for 401(k) purposes, and in some cases the 401(k) plan document defines multiple definitions of compensation for different purposes. For example,
Problem #2 (cont): Examples
Below are some examples of operational 401(k) errors. If a 401(k) plan sponsor is aware of an operational error, the plan sponsor should work with their 401(k) TPA or 401(k) provider to resolve the situation. In many cases, it is also necessary to engage an ERISA attorney. Example 1 XYZ Company’s 401(k) plan document says … Read more
Problem #2 (cont): General correction principles
IRS Revenue Procedure 2008-50 includes general correction principles and some specific guidance for plans to use when a plan is correcting an operational error due to failing to apply a plan’s terms. The most fundamental correction principle for correcting operational failures is to try to put the plan back in the place it would have been had there not been an operational failure. In many cases (but not all), this principle gives us a pretty
Problem #2 (cont): SCP vs.VCP
If an employer has failed to operate a plan according to its provisions, the plan must be corrected. Assuming the employer finds the error before the IRS, the employer can file under VCP. Additionally, under some circumstances the employer can self-correct the error without a formal filing. While employers are often initially drawn to self-correction, not all operational issues qualify for self-correction, and in some cases more correction options are available under VCP.
Karen Smith to speak on Qualification Standards
Karen Smith will speak on a panel at the ACOPA Advanced Actuarial Conference in San Francisco on June 6 –7, 2011. Karen will speak on the Qualification Standards and Carol Zimmerman of the IRS will speak on the new JBEA regulations. US actuaries are required to comply with the Actuarial Code of Conduct. Precept 2 … Read more
Problem #2: Failure to operate the plan according to its terms
ERISA and the IRC require that a plan have a written plan document that includes the plan provisions such as the eligibility, contribution amounts, distribution provisions, etc. Additionally, the plan document includes certain IRS provisions like age 70 ½ distributions. Plan documents explicitly provide all major plan terms, and it is generally unnecessary to establish a lot of administrative provisions interpreting or clarifying the plan’s
Problem #1 (cont): Examples
Below are some examples of plan document errors. If a 401(k) plan sponsor has a plan document error, the plan sponsor should work with their 401(k) TPA or 401(k) provider to resolve the situation. In many cases, it is also necessary to engage an ERISA attorney.