While most Plans Sponsors, Third Party Administrators and Record Keepers know about an 8955-SSA, many Advisors aren’t aware of one of the most valuable forms/reports/tools to remove terminated retirement plan participants. Simply asking a plan sponsor what they are doing with those names is a great step towards cleaning up a plan to reduce administrative burden and mitigate fiduciary liability.
So what is an 8955-SSA? Per the IRS:
“Administrators of retirement plans that are subject to ERISA’s minimum vesting requirements must file Form 8955-SSA with the IRS to report deferred vested benefit information for participants who separate from service during the plan year.”
The form contains terminated participants along with their social security number and vested balances. Unlike a Form 5500, the 8955-SSA is not public information due to the confidential nature.
Once reported, plan sponsors, TPAs, record keepers or advisors should address those names of participants listed on the 8955-SSA. While the end result is the same for the plan sponsor, the strategies for each group are a little different.
In sports terms, Advisors can use an 8955-SSA on offense and defense.
Let’s define “offense” as prospecting for new plans, thereby proving value up front. Ask a plan sponsor “What are you doing with those individuals and balances listed on the most recent 8955-SSA?” Is the current advisor asleep at the wheel? If there are terminated balances of $5,000 or less, they are eligible to be forced out, so use an independent auto rollover record keeper to remove those participants and balances. Present the cleaner plan with higher average balances to a provider for better pricing. Advisors that do so have demonstrated value even before taking on a new plan.
Let’s define “defense” as cleaning out your existing plans, thereby insulating your business from other advisors telling your plans that you are asleep at the wheel. Ask your plan sponsors about the recent terminated participants included on an 8955-SSA. Force out the under $5,000 accounts to an auto rollover RK. Decide what size rollovers you and your firm would like to try to retain. If applicable, present the cleaner plan to the incumbent for re-pricing purposes.
Either way, Advisors could use an IRS Form 8955-SSA as a valuable resource.