Schedule SSA: Does anyone know the definition of "DEFERRED VESTE

[Moe Howard]

It is unbelieveable that the Schedule SSA instructions do not define what the phrase "deferred vested benefits" mean.

Here's my situation:

I am a sole proprietor. My business has a profit sharing plan with 15 employee/ participants. I make discretionary contributions to the plan each year for each participant. The plan has "NO" 401(k) feature and the employees "DO NOT" contribute to the plan on either a pretax or after tax basis. All contributions are from me (the employer).

Some participants (with a vested balance) have terminated employment with my business. Their vested account is still in the plan. The plan expects to make a "lump-sum" distribution to them in a couple of years.

Here's my questions:

1) Is their vested account balance (which is still held by the plan) deemed a "deferred vested benefit", which requires the plan to attach a Schedule SSA to its Form 5500 until the lumpsum distribution is made ?

2) Since no employee deferred funds were contributed to the plan, does the plan even have to file a Schedule SSA ?

3) What in the world is a "deferred vested benefit ?

[Guest]

1. separated participant must be reported on the SSA no later than the plan year following year of separation.

in other words, if ee quits you don't need to report him in the year of termination.

the following year you would report him only if you did not pay him out.

instructions further say: do not report a participant more than once unless you wish to revise or update a prior SSA.

you are encouraged to report changes to previously reported info.

2. yes, see note 3 below

3. ah, I can see your possible confusion by the term 'deferred'.

this has nothing to do with deferrals as in a 401(k)

in a 401(k) plan an ee 'defers' receiving compensation. instead his $ go into the plan.

for the SSA an employee 'defers' taking a distribution and leaves his money in the plan. this money can be from profit sharing, defined benefit, etc

[david rigby]

Tom has summarized very nicely.

One addition to his comment: "...the following year you would report him only if you did not pay him out". You also do not need to report on the SSA if the EE

1. is rehired, or

2. forfeits all the benefit, which could occur under a DB plan in case of death with no surviving spouse, and which seems very unlikely in a profit-sharing plan.