SECURE Act Increases Late Filing Penalties (Form 8955-SSA)
Updated: Mar 10, 2022
When it comes to your retirement plan, there are many forms and documents you should know about. Of primary concern should be what penalties may affect you if these forms are not filled out accurately or filed timely. Tucked away into the library of IRS and government forms are many documents that are easily confused, yet can open a floodgate of penalties for someone who doesn't understand the differences. Naturally, we want to help you avoid such penalties, so let's talk about just one of these forms: Form 8955-SSA.
Now, you may be thinking, "but I don’t file an 8955-SSA form." This is because often your service provider will complete the form and submit it electronically on your behalf. Unlike the Annual Plan Reporting done via the 5500 filings (similar to a corporate or individual tax return, but specific to a retirement plan), the 8955-SSA is filed with the Social Security Administration—not the IRS—to report participants who have left benefits in your retirement plan. But, just like the penalties, the IRS has for late filing or not filing your 5500, there are penalties for not filing Form 8955-SSA.
The Annual Registration Statement Identifying Separated Participants with Deferred Vested Benefits, more commonly—and more simply—known as Form 8955, is used to satisfy the reporting requirement of the Internal Revenue Code section 6057 (a). Form 8955-SSA is a stand-alone reporting form, which means it should not be filed with Form 5500 and it is filed directly with the Social Security Administration, not the IRS.
The form is used to report information about separated participants with deferred vested interest under retirement plans. Required information includes participants who have a deferred vested benefit under the plan and who meet one or all of the following conditions:
Separated from service covered by the plan
Were reported as deferred vested participants on another plan's filing if their benefits were transferred (other than a rollover) to the plan during the covered period
Previously were reported under the plan but have been paid out or are no longer entitled to those deferred vested benefits
Previously were reported under the plan but whose information is being corrected
The information reported on Form 8955-SSA is submitted to the Social Security Administration (SSA). The SSA provides the reported information to separated participants when they file for social security benefits, so they are aware they have money remaining in an Employer’s retirement plan.
There are three possible penalties related to the filing of Forms 8955-SSA:
1. Failure to file an annual registration statement (IRC section 6652(d)(1)) This penalty applies to failure to file a registration statement (including failure to include all required participants). The penalty has been increased to $10 from $1 for each participant not reported and for each day multiplied by the number of days the failure continues, up to a maximum of $50,000 from $5,000 applied to returns, registration statements, and notifications required to be filed after December 31, 2019, as amended by section 403 of the Setting Every Community Up for Retirement Enhancement Act of 2019 (SECURE Act). The penalty is imposed on the person failing to file unless it is shown the failure is due to reasonable cause.
2. Failure to file notification of a change in the status of the plan (IRC section 6652(d)(2)) This penalty applies to failure to file a notification of a change in the status of the plan, such as a change in the plan name, termination of the plan, or a change in the name or address of the plan administrator. The penalty has been increased to $10 from $1 for each day during which such failure occurs, up to a maximum of $10,000 from $1,000 applied to returns, registration statements, and notifications required to be filed after December 31, 2019, as amended by SECURE Act. The penalty is imposed on the person failing to file unless it is shown the failure is due to reasonable cause.
3. Failure to furnish statement to plan participant or fraudulent statement (IRC section 6690) Each plan administrator required to file a registration statement must, before the expiration of the time prescribed for the filing of the form, also furnish to each affected participant an individual statement setting forth the information required to be contained in the form. A penalty of $50 is imposed on the person required to furnish the statement for each willful failure to furnish the statement to each affected participant or a willful furnishing of a false statement.
The deadline to file is the same as the 5500, the last day of the 7th month following your plan year-end date (July 31st for calendar year plans). These penalties are a significant increase over the prior amounts accessed, so be sure to be accurate and timely in your filing!
If you do need to pay a penalty, the IRS will contact you with instructions as to how to pay the penalty. Be aware that there have been scammers who will call claiming to be the IRS and demand payment, but the IRS will only contact you via a letter delivered by the United States Postal Service.