Do you do SSA's?

[MR]

Lets say you have a 401(k) plan with a year-end payout policy for terminated participants. At the end of any given year, there are a few terminated participants who have not been paid. Some have been gone for a couple years. Would you put them on an SSA? We typically don't. Although the instructions don't give me any authority to elect not to file, I am more concerned about what could happen if we forget to "un-SSA" the participant when he is paid later. Let's say he's 35 when he terminates and you put him on an SSA. He is paid three years later and is not removed from the SSA. Then 27 years later, he receives a notice that he has a deferred vested benefit and comes looking for it. The client has switched providers four times since then and doesn't have proof that the guy was paid already. Now what? I'd rather explain to an IRS agent that we didn't feel an SSA was necessary than deal with a much bigger problem years down the road. Am I alone in this thinking?

[KIP KRAUS]

MR:

I have been filing 5550s since 1977. I have always been under the impression that SSAs where for DB plans or plans that actually had a quote "Deferred Vested Benefit" where actual benefit payments were based on age and service.

As is typical with most 401(k) plans when a person terminates he she is entitled to a full distribution of his/her vested account account balance.

However, at the insistance of our current auditors, for the past three years I have been filling SSAs. This has already caused confusion to some of our retirees who have been notified by the SS Administration that they are entitled to a deferred vested benefit from our 401(k) plans when in fact they have already taken a distribution.

It's just another way for uncle Sugar Daddy to protect your rights from those big bad employers and multiple employee trusts that are out to rip you off.

[R. Butler]

I have worked for 2 companies. Both companies filed the SSA. Furthermore, for defined contribution plans, in participants were generally reported each year until they were paid, using Code B. The reason being is that the amount of the vested benefit changes due to gains and losses. When the participants were paid out we reported them on the SSA using Code D. This lets the SSA know the participant is no longer entitled to vested benefits under the plan.

The problem I would have with not filing is the possible penalty for failing to file.

[david rigby]

Lucky me, I do not fill out 5500s, just the Schedule B.

The SSA is for any participant with a deferred vested benefit. The SSA instructions do not make an exception for DC plans. Note also that "lump sum" is one of the choices of form of payment. The instructions also tell you how to complete Line 4, Box h for DC plans.

The time for including a separated participant on the SSA is no later than the 5500 filing for the plan year following the plan year of separation of employment. If the EE has been paid out by the filing date, then no need to report.

You can go here for instructions: http://www.dol.gov/dol/pwba/public/pubs/fo...rms/fm99inx.htm

[richard]

I do make sure that SSAs are filed timely. However, I recognize that if a participant is subsequently paid out and he isn't "un-SSAed", there could be confusion 20+ years from now.

I wonder what proof must be provided and who must provide it in this case. Can the former participant place the burden of proof on the plan sponsor by saying "here is the notice by the Social Security Administration." Can the plan sponsor simply say that we paid you (and not provide any further proof), and we did not have to un-SSA you? Even without a SSA requirement (or for that matter, let's say that an SSA wasn't done), what proof does a 65-year-old have to provide in claiming a benefit, and what proof does a plan sponsor have to provide in a benefit denial?

Even a large plan sponsor is unlikely to be able to access 20-year-old data (even without a change in recordkeeper/administration). Now a small or mid-sized company, I suspect, will not only have gone through several recordkeepers/administrators, but the plan will probably have been terminated and all assets distributed in the interim. So now we would have the participant claiming a benefit from a plan long since terminated.

Any thoughts on who has to prove what?

(Gee, I hope I'm unSSAing these people!)

[KIP KRAUS]

I still want to know what business is it to the SSA?

If a plan sends out SARs to former participants with a vested benefit, like they are supposed to do the foremer participant will continue to know that he/she has a deferred vested benefit entitlement. However, I don't think employers are doing the SARs to deferred vesteds. I know one of my former employers doesn't send me one.

[R. Butler]

Hypothetically this really shouldn't be a big problem. Just remember to report participants as paid out (Code D)after they have been distributed their vested benefits.

Clearly mistakes will happen; we will forget to report somebody that has been paid out, but those cases are very rare, much less frequent than many other errors that actaully could disqualify the plan.