Retirement Plan Processor
T Bank NA
ESOP Valuation Writer
Unique ESOP Valuation Provider
Defined Contribution Account Manager
Nova 401(k) Associates
(Houston TX / Dallas TX / Scottsdale AZ / Telecommute)
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|Question 322: How does the recent Advisory Opinion on open MEPs affect the responsibility to file Form 8955-SSA?|
Answer: The answer to this question is surprising. My first reaction was that 8955-SSA is a Code requirement (see Code § 6057) and therefore the Code definition of a plan would prevail. Because the Code treats a MEP as a single plan, there would be but one Form 8955-SSA filed. That is indeed how it would work for Form 5500 were it not for ERISA (and why the MEP itself must continue to file for Code purposes).
But that first reaction is wrong. Code § 6057(a)(1) compels retirement plans subject to ERISA's vesting requirements to file an SSA. While the MEP as a whole must comply with the vesting standards of Code § 411 (as modified by Code § 413(c)), Advisory Opinion 2012-04A effectively clarifies that it is the individual employer plan that is subject to ERISA's vesting provisions, because it is the only plan ERISA recognizes. Thus, each separate underlying plan, for each separate sponsor, must file a separate SSA for its employees.
In many respects, that seems a burdensome result, but I see no other way to interpret the legal requirements. Perhaps the IRS will see its way clear to providing administrative relief and letting a combined SSA for the MEP as a whole suffice. But, unless the IRS does so, each adopting employer of an underlying ERISA plan must file an SSA if applicable, or the employer or plan administrator becomes subject to a penalty of $1/participant/day for late filing or non-filing, up to a maximum of $5,000/year.
I hate to say it, but I believe from a policy standpoint that is the correct result. Ultimately, the MEP represents a mechanism to deliver a bundle of services and investment options to a plan. As with other service providers, employers move from one vendor to another. They might switch to another MEP, or move to a separate plan. As a result, the logical party for a retired former participant to contact to ask about his or her benefit is not the MEP provider, but the employer.
There is a certain symmetry in this result. Each underlying plan files a 5500. Each underlying plan files an SSA. The plan administrator (as named in the plan document, likely one of the MEP organizers) can file an extension request (Form 5558) for both. The identifying information (lines 1, 2, and 3) is the same for both. The administrator must sign both forms. According to the SSA instructions, because the plan sponsor of the underlying plan (the employer) is different from the plan administrator, the plan sponsor must also sign the SSA.
For further discussion of the qualification issues related to MEPs in general, see Chapter 18 of the new 6th Edition of my book, Who's the Employer. For a comparison of the Code and ERISA issues relating to open MEPs, see my article, Multiple Employer Plans: An ERISA Enigma, appearing in the Winter 2012 issue of the Journal of Pension Benefits (Vol. 19, No. 2, p. 6).
Answers are provided as general guidance on the subjects covered in the question and are not provided as legal advice to the questioner or to readers. Any legal issues should be reviewed by your legal counsel to apply the law to the particular facts of this and similar situations.
The law in this area changes frequently. Answers are believed to be correct as of the posting dates shown. The completeness or accuracy of a particular answer may be affected by changes in the law (statutes, regulations, rulings, court decisions, etc.) that occur after the date on which a particular Q&A is posted.