Form 8955-SSA - When to remove a former participant

[msmith]

401(k) Plan - A terminated participant was added to Form 8955-SSA in 2016. In 2018, they started receiving their RMD's. The Instructions to the Form, for Code D, states "Use this code for a participant previously reported under the plan number shown who is no longer entitled to those deferred vested benefits. This includes a participant who has begun receiving benefits......"

Do we interpret the above quotation to include former participants that have started to receive their RMD's?

Not sure if it matters, but this Plan does not permit annuity forms of payment.

 

[Bird]

15 hours ago, msmith said:

Do we interpret the above quotation to include former participants that have started to receive their RMD's?

I don't think so.  I believe they mean some sort of irrevocable benefit payment, such as an annuity.

[RatherBeGolfing]

2 minutes ago, Bird said:

I don't think so.  I believe they mean some sort of irrevocable benefit payment, such as an annuity.

Correct.  it basically means that the participant will not need to take action to receive payment of any funds in the account because it has been paid or reserved for scheduled payment.

[david rigby]

Hold on here.  What's the purpose of the Form SSA?  So the SSA can remind someone to look for a benefit in a qualified plan, and it's done when the person applies for Social Security benefits.  Of course someone receiving RMD has "begun receiving benefits".

But more to the point, what does the plan say about when a terminated participant's benefit should begin?  Many plans say NRD, or some reference to NRD such as the end of the calendar year of attaining NRD.   IOW, should this terminated participant ever get to his RMD date?

Hey, I'm just wondering.  Have I missed something?

[Bird]

2 hours ago, david rigby said:

So the SSA can remind someone to look for a benefit in a qualified plan, and it's done when the person applies for Social Security benefits.

True, which makes is somewhat theoretical.

2 hours ago, david rigby said:

Of course someone receiving RMD has "begun receiving benefits".

Well, that's what we are debating... :)

2 hours ago, david rigby said:

But more to the point, what does the plan say about when a terminated participant's benefit should begin?  Many plans say NRD, or some reference to NRD such as the end of the calendar year of attaining NRD.   IOW, should this terminated participant ever get to his RMD date?

My emphasis on "should" above - I believe the correct word is "may" - RMD language generally supersedes anything else as far as "must."  

I can be pretty cavalier about stuff like this, and I think the worst-case scenario for taking someone off too soon is $1/participant fine, but I don't see any need to rush to remove them.

[msmith]

This Plan permits installment payments (weekly, monthly, semi-annual or annual) for those subject to the RMD. The RMD has been set up by the Recordkeeper as "recurring" annually.

[Tom Poje]

I thought the whole concept behind the form was a 'just in case the participant moved on' and forgot or didn't know he had $ somewhere.

If he is receiving min distribution, then he must know he has $ in that plan. just what the heck is he going to do when he receives the letter from the SSA telling him he might have $ in the plan?

"Well DUH, I know am getting a minimum distribution from the plan"

or

"Oooh, I might have $ in that plan I don't know about"

[david rigby]

1 hour ago, Bird said:

My emphasis on "should" above - I believe the correct word is "may" - RMD language generally supersedes anything else as far as "must."  

Yeah, my point is to wonder if these RMDs are 70-1/2 based, but the plan might state the benefit begins (to a VT) at some earlier date (such as NRD).  

[msmith]

This is an actual RMD for a terminated participant that attained age 70 1/2 after her termination date.

[Tom Poje]

ha ha ha. I thought about this some more. the whole thing is a moot point.

How is the Form 8955-SSA information used by the government?

Although filed with the IRS, the information is shared with the Social Security Administration (SSA) who maintains it 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 plan.

This is why we suggest un-reporting former employees once they have taken a full distribution. That employee may not remember that they already received their money from the plan, and it can be a tall order to try to explain that fact when they are holding an “official” letter from the government that says they are entitled to a benefit.

https://www.dwc401k.com/knowledge-center/form-8955-ssa-faqs

 

so, at the latest (age 70) the person starts collecting Social security. at that time the govt sends out a note "You may have $ in a plan". they only do that once as far as I know.

so the person involved should have already received that letter, since they are past age 70 and are already collecting SSA. . so I guess they could be on the SSA list as an A forever and it wouldn't matter!