7 Key Questions & Answers Concerning Ex-Employees' "Abandoned" 401k Assets and Reporting these Assets to the IRS using Form 8955-SSA

PLEASE NOTE:
If Your company uses 401k Easy’s Form 5500-SF Preparation and Filing Service, the Form 8955-SSA preparation and filing is included at no extra cost.

What is IRS Form 8955-SSA?

Form 8955-SSA is used to satisfy the reporting requirements of section 6057(a). Form 8955-SSA is a stand-alone reporting form filed with the IRS.

What gets reported on Form 8955-SSA?

The form requires the 40k plan sponsor to report any ex-employee participant who terminated employment in a prior year and essentially "abandoned" their money in the company's 401k by not cooperating in selecting a distribution option (either lump-sum or IRA Rollover) for their 401k retirement savings. The form must include the social security number, name, and vested benefit due for each participant who is required to be reported.

How does the government use Form 8955-SSA information?

Although filed with the IRS, the information is shared with the Social Security Administration (SSA) who maintains in a database. When individuals apply for Social Security benefits, SSA queries its database and notifies applicants that they are entitled to benefits from the company's 401k plan.

What is the filing deadline? Can I extend Form 8955-SSA?

Although it is an entirely separate, stand-alone form, the deadline for filing Form 8955-SSA is the same as the deadline to file Form 5500, i.e., seven months after the plan year's close. Like Form 5500, the deadline can be extended by 2 ½ months by submitting Form 5558.

Are there penalties for filing Form 8955-SSA after the deadline?

Yes. There are four types of penalties that could apply to a late filing. The two most likely to use are as follows:

• Incomplete Filing Penalty: $10 per day for each participant that is required to be reported but is not included on the form (up to a maximum of $50,000 per plan year)
• Late Filing Penalty: $25 for each day Form 8955 is late (with no maximum). Additional information about these penalties is available on the IRS website here.

How are the penalties paid?

According to the IRS website, the 401k plan sponsor should not voluntarily mail any payment of penalties. If the IRS decides to assess a penalty, they will contact the plan sponsor directly with details. WARNING: There has been an increase in telephone scams in which a caller claims to be from the IRS and demands payment of a penalty. It is important to note that if a penalty is assessed, the contact you receive from the IRS will be by letter sent via U.S. mail.

Is there a delinquent filer program to correct the late filing voluntarily?

Sort of, but not really. First, the IRS recommends filing the form as soon as possible after discovering that it's late. As noted above, if the IRS decides to assess a penalty, they will contact the 401k plan sponsor directly. However, if a company's Form 5500 for the year is late and correct via the Department of Labor's Delinquent Filer Voluntarily Compliance Program, the company will get "credit" for having filed a late Form 8955-SSA